Goldman Sachs sends strong message on next Fed rate cut

Markets spent most of 2026 waiting for the Federal Reserve to deliver rate cuts that Goldman Sachs had been forecasting for December 2026 and March 2027. On June 6, after the May jobs report landed well above every economist's estimate, Goldman crossed both dates off the calendar entirely.

The bank's new message is blunt: no rate cuts this year, and a meaningful chance the Fed's next move is not a cut at all.

What Goldman Sachs said about the Fed and what changed its forecast

Goldman Sachs chief U.S. economist David Mericle published a note on June 6 removing the bank's two 2026 rate cut calls and replacing them with two quarter-point reductions in June and December 2027, according to Bloomberg.

The trigger was May's employment report. The U.S. economy added 172,000 nonfarm payroll jobs in May, well above the 80,000 to 85,000 economists had projected.

The unemployment rate held at 4.3% for a third consecutive month. Goldman concluded the data gave the Federal Reserve no reason to ease policy this year, Investing.com reported.

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Mericle went further than simply pushing back the timing. Goldman also doubled its estimated probability of a modest rate hike to 20%, up from 10% previously.

The bank stopped short of making a hike its base case, but the move signals that the distribution of possible Fed outcomes is shifting in a more hawkish direction, according to Bloomberg.

What Goldman said must happen before the Fed cuts rates

The Goldman note did not just revise the calendar. It laid out a specific set of conditions that would need to be met before the bank would expect the Fed to act.

Mericle said rate reductions should wait until four factors converge, according to Investing.com.

• Tariff-related disruptions ease.
• Oil price pressures from the Iran conflict subside.
• What Goldman views as inflated AI demand normalizes.
• Year-over-year core PCEinflation moves closer to 2%.

Goldman's own confidence in its revised forecast is limited. The bank assigns only 30% odds to its two-cut 2027 scenario, down from 40% previously. The remaining 70% of the probability distribution includes outcomes ranging from no cuts at all to a modest hike.

The verbatim language in Goldman's note on the rate hike risk is precise.

"The resilient activity and employment data also lower the bar for a rate hike, less because they suggest a risk of overheating than because a stronger starting point for the economy reduces the risk that a hike could end up looking like a costly mistake," Mericle wrote, according to Bloomberg.

Why the May jobs report was a bigger surprise than it seemed

The gap between the 172,000 jobs added in May and the 80,000 to 85,000 economists had projected is not a normal miss. It is more than double the consensus estimate. That magnitude matters because it suggests the Fed's restrictive policy is having less impact on the labor market than models implied, and it directly undermines the case for easing.

The Federal Reserve has kept its benchmark rate in the 3.50% to 3.75% range since trimming borrowing costs by three-quarters of a point in late 2025. The May jobs data suggests that level of restriction is not producing the labor market cooling the Fed would typically want to see before cutting, Bloomberg noted.

Goldman is not alone in reading it that way. Nomura had already forecast the Fed would hold through all of 2026. Bond markets moved in the same direction as Goldman's note, investors priced in a quarter-point Fed hike by December following the May jobs report, and the Nasdaq 100 fell 5% on the day the data were released, Investing.com reported.

Key figures from Goldman's June 6 Fed forecast revision:

• Goldman's previous forecast called for quarter-point cuts in December 2026 and March 2027; both have been removed and replaced with quarter-point cuts in June and December 2027; the shift represents a full six-month delay from the prior timeline, according to Bloomberg.
• Goldman assigns 30% odds to its two-cut 2027 scenario, meaning the bank's base case carries only slightly better than coin-flip confidence; the remaining 70% includes no cuts, one cut, or a modest hike, Investing.com confirmed.
• The four conditions Goldman requires before cutting: tariff disruptions ease, Iran war oil pressure subsides, what Goldman calls inflated AI demand normalizes, and year-over-year core PCE inflation approaches 2%; none of these are currently met, Investing.com reported.
• The Nasdaq 100 fell 5% on June 6, the day the May jobs report was released; the selloff reflects how directly rate cut expectations have been embedded in equity valuations, particularly for growth and technology stocks, according to Bloomberg.
• The Fed's current benchmark rate of 3.50% to 3.75% was reached after three-quarter-point cuts in late 2025; Goldman's revised forecast implies rates will stay at this level for at least 18 more months, making this the longest anticipated hold since the post-pandemic hiking cycle, Bloomberg confirmed.

What Goldman's Fed forecast change means for investors in stocks and bonds

The direct market implication of Goldman's revision is that the interest-rate environment investors had been pricing as temporary is now expected to persist into 2027. That has specific consequences for equities.

Technology and growth stocks face a longer wait for the valuation support that rate cuts would provide. The 5% Nasdaq decline on the day of the jobs report is the most immediate expression of that dynamic.

For fixed income investors, Goldman's note reinforces the case for shorter-duration positioning. Bonds with longer maturities are more sensitive to rate expectations, and a 20% probability of a hike removes the tailwind supporting longer-dated Treasuries.

The yield on the 10-year Treasury has been moving higher in anticipation of exactly this kind of revision.

The broader question the note raises is whether the May jobs report is a one-month anomaly or a signal that the U.S. economy's resistance to monetary tightening is more durable than Goldman's previous models assumed.

If 172,000 jobs in May is followed by similarly strong June and July readings, Goldman's 2027 cut timeline may need another revision. Mericle's note acknowledges that possibility, which is why the bank assigns only 30% confidence to its own baseline.

Related: Top analyst hurls new warning on Fed rate-hike odds

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This story was originally published June 9, 2026 at 1:00 PM.