Goldman delays Fed cut to December

Interest-rate forecasts are moving again — and this time the shift is toward waiting longer. Goldman Sachs now thinks the Federal Reserve will not deliver its first rate cut until December 2026, not earlier in the year. Bank of America has gone further and now expects no cuts at all in 2026, with easing only starting in 2027. The basic message is simple: inflation still looks sticky, the job market still looks solid, and Wall Street is backing away from the idea that the Fed is close to rescue mode. ### What changed this week? Goldman changed its forecast on May 11 and pushed its first expected cut to December 2026. The bank also lowered its estimate of a U.S. recession over the next 12 months to 25% from 30%, which tells you this is not a panic call about growth rolling over. It is almost the opposite — the economy looks firm enough that the Fed has less reason to cut quickly. (investing.com) ### Why would strong data delay cuts? Because the Fed cuts when it thinks growth is weakening or inflation is under control — ideally both. But the mix right now is awkward. Jobs have held up better than expected, and inflation has not cooled enough to make policymakers comfortable. If hiring stays decent and prices stay sticky, the Fed risks reigniting inflation if it cuts too soon. (investing.com) ### Why are energy prices part of this? The recent Iran war has pushed energy prices higher, and that matters because oil shocks can bleed into headline inflation fast. Goldman’s shift was tied in part to the risk that higher energy costs keep overall inflation elevated for longer. The catch is that central banks usually try to look through one-off commodity spikes — but that gets harder when core inflation is already running too hot. (investing.com) ### Why is Bank of America even more hawkish? Bank of America’s economists now expect the Fed to stay on hold through all of 2026, with two quarter-point cuts only in July and September 2027. Their argument is blunt: the data still do not justify easing. Core inflation remains too high, and recent labor-market resilience makes it harder to argue that policy is choking the economy. (investing.com) ### Wasn’t Wall Street expecting cuts sooner? Yes — and that is what makes this notable. Earlier this year, Goldman had been looking for earlier easing, and Bank of America as recently as April was still sticking with two cuts in 2026. Now both the timing and the tone have shifted. That does not mean everyone agrees, but it does mean the center of gravity on Wall Street has moved in a more hawkish direction. (thestreet.com) ### What does “higher for longer” actually hit? Mortgages stay expensive. Corporate borrowing stays expensive. Risk assets lose some of the easy support that comes from falling rates. But a delayed-cut story is not automatically bad news — if the reason is that growth is holding up, that can support earnings and reduce recession fear. That is basically the tradeoff Goldman is pointing to with its lower recession odds. (thestreet.com) ### What should readers watch next? Watch the next inflation prints, wage data, and any sign that hiring is finally cracking. If inflation cools decisively, these forecasts can change again fast. But for now, the market story is less “when does the Fed start helping?” and more “what if the Fed does not need to?” ### Bottom line? (investing.com) This is a repricing of the whole rate story. Goldman says December 2026. Bank of America says maybe not until 2027. Different timelines — same message: the Fed still looks stuck waiting.