Goldman Sachs Rethinks the Timing of Fed Policy Shifts

Source: CryptoNewsNet Original Title: Goldman Sachs Rethinks the Timing of Fed Policy Shifts Original Link: https://cryptonews.net/news/legal/32261326/ Wall Street experienced a major shift on Friday morning after Goldman Sachs changed its view of future Federal Reserve monetary policy. Goldman delayed its projections for future Federal Reserve rate hikes to 2023 based on greater confidence that the economy will recover from the pandemic. This change in Goldman’s projection has significantly influenced how investors, corporations, and other financial market participants view future interest rates.

Goldman now projects that the Federal Reserve will begin its easing cycle in June, with a second cut potentially following in September. Each cut would reduce rates by 25 basis points, maintaining a gradual and controlled approach. Additionally, Goldman’s revised estimates have reduced the projected risk of recession in the US by approximately 10%.

Why Goldman Sachs Changed Its View on Federal Reserve Rate Cuts

The updated outlook stems from stronger-than-expected economic data. Consumer spending remains firm despite elevated borrowing costs, and labor markets continue to show resilience across major sectors.

Inflation has cooled faster than expected without damaging growth momentum. These trends have given policymakers more flexibility to delay action. Goldman Sachs believes the Federal Reserve can afford patience without risking financial instability.

What the New Fed Funds Rate Outlook Signals for 2026

Goldman Sachs now expects the fed funds rate to end 2026 between 3% and 3.25%. This range suggests a slower normalization process than earlier projections, implying confidence in long-term economic stability. The Federal Reserve aims to keep rates restrictive enough to manage inflation while avoiding unnecessary pressure on growth.

The fed funds rate outlook also reflects global conditions. Central banks worldwide remain cautious amid geopolitical uncertainty and uneven recoveries. Goldman believes the Fed will move carefully to avoid destabilizing capital flows.

How Goldman Sachs Forecast Reflects Economic Strength

According to Goldman Sachs’ estimates, we should expect continued strong underlying fundamentals. Overall wage growth remains positive without resulting in increased inflation pressures. Earnings from large publicly traded companies continue to surprise to the upside relative to expectations, and manufacturing production is stabilizing after a period of contraction.

These positive signs lessen the need for the Federal Reserve to act immediately on interest rates, allowing them to be more patient and wait for sustained disinflation. Goldman Sachs also noted that financial markets have improved overall, credit markets are functioning well, and liquidity conditions show no stress.

What This Means for Businesses and Consumers

Businesses may face higher financing costs for longer periods, and capital spending decisions could remain cautious through mid-2026. Consumers may not see immediate relief in borrowing costs, as mortgage and credit rates may stay elevated, influencing housing demand.

However, steady growth supports job security and income stability, helping offset the impact of delayed rate cuts. Goldman Sachs believes gradual easing avoids economic shocks and supports sustainable expansion rather than short-term stimulus.

A More Confident Path Forward for Monetary Policy

This shift highlights growing confidence in the US economy. Policymakers no longer feel the need to rush into intervention, and Federal Reserve rate cuts now appear more strategic. Goldman Sachs expects this patient approach will support long-term stability, with lower US recession risk strengthening this outlook. A measured approach allows inflation control without derailing growth, and while markets may need time to adjust, increased clarity helps reduce uncertainty over time.