BY COMFORT OGBONNA
Goldman Sachs has pushed back its expectations for when the U.S. Federal Reserve will begin cutting interest rates, citing growing inflation risks tied to escalating tensions in the Middle East.
The investment bank now predicts that the Federal Reserve will implement two quarter-point interest rate cuts later in the year, specifically in September and December. The revised outlook reflects concerns that geopolitical instability and rising energy prices could fuel inflation, making it more difficult for policymakers to ease monetary policy in the near term.
Earlier projections from Goldman Sachs had anticipated the first rate cut as early as June, followed by another reduction in September. However, the bank has now reassessed that timeline after adjusting its inflation forecast upward.
In a note released Wednesday, Goldman Sachs said the prospect of a June rate cut appears unlikely under the updated economic outlook. Analysts explained that the risk of persistent inflation, partly driven by global energy market disruptions, makes it difficult for the Federal Reserve to justify lowering rates in the coming months.
The bank also noted that while the timeline has shifted, earlier rate cuts could still occur if economic conditions change significantly. In particular, a faster-than-expected slowdown in the U.S. labor market could prompt policymakers to reconsider the timing of monetary easing.
Economists emphasized that the Federal Reserve continues to closely monitor employment data, wage growth, and inflation indicators when determining the path of interest rates. Any sharp deterioration in the job market could create room for earlier action.
For now, however, Goldman Sachs believes that the central bank will remain cautious, prioritizing inflation control before moving toward rate reductions later in the year.
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