Goldman Sachs Research forecasts that the Federal Reserve will keep its policy interest rate unchanged throughout 2026 [1].
This projection suggests a prolonged period of high borrowing costs for consumers and businesses, potentially slowing economic momentum while the central bank navigates volatile global conditions.
David Mericle, chief U.S. economist at Goldman Sachs Research, said the firm expects the Fed to maintain its current stance for the remainder of the year. "We expect the Fed to keep rates unchanged this year and then start cutting in 2027," Mericle said [1].
The outlook comes as the U.S. economy faces a complex set of headwinds. While inflation prints have appeared soft, escalating geopolitical tensions in the Middle East continue to threaten global stability, a factor that often complicates central bank decision-making.
Despite these shocks, the firm expects U.S. GDP to expand modestly. This resilience is attributed in part to a surprisingly durable labor market that has resisted broader economic pressures [1].
The current environment is also shaped by the transition to a new era at the Federal Reserve under its newly installed chairman. The interaction between a resilient job market and soft inflation creates a divergent set of signals for policymakers, which may explain the projected delay in rate reductions [1].
Goldman Sachs indicates that the shift toward lower rates will not begin until 2027 [1]. This timeline implies that the Federal Reserve remains cautious about premature easing that could reignite inflationary pressures or destabilize the currency in the face of ongoing international conflict.
“"We expect the Fed to keep rates unchanged this year and then start cutting in 2027."”
The forecast signals a 'higher-for-longer' regime that extends into next year, suggesting the Federal Reserve prioritizes inflation stability over immediate growth stimulation. By delaying cuts until 2027, the Fed is effectively betting that the U.S. labor market can withstand prolonged restrictive rates, even as geopolitical instability in the Middle East creates potential shocks to energy prices and supply chains.
