Countdown to the Federal Reserve's interest rate decision, Goldman Sachs expects three more rate cuts this year
Goldman Sachs predicts that the Federal Reserve will cut interest rates three times in the coming months, totaling a reduction of 75 basis points, in July, September, and October. This move aims to address inflation and employment risks triggered by tariff measures. Despite a pessimistic economic outlook, the Federal Reserve is expected to wait for strong signals from the labor market before taking action. U.S. economic indicators have shown mixed results, with April's job additions exceeding expectations, but consumer confidence dropping to a 13-year low. Federal Reserve Chairman Jerome Powell warned that tariffs could impact economic goals
According to the Zhitong Finance APP, Goldman Sachs predicts that the Federal Reserve may cut interest rates three times in the coming months, specifically in July, September, and October, totaling a reduction of 75 basis points. This move aims to balance the inflation and employment risks triggered by recent U.S. tariff measures.
Goldman Sachs stated in its report that despite economic surveys showing an increasingly pessimistic outlook, it expects the Federal Reserve to wait for strong and clear signals from the labor market before taking any monetary actions. The report noted that actual data typically takes about three months to reflect a significant deterioration, which has not yet occurred.
U.S. economic indicators are mixed: in April, 177,000 new jobs were added, exceeding market expectations, but the unemployment rate remained stable at 4.2%. On the other hand, U.S. consumer confidence plummeted, with the confidence index dropping to 86 points in April, the lowest level in 13 years, due to growing concerns over tariffs, which have become the public's top concern.
In contrast, as of the end of March, the number of job vacancies fell to 7.19 million, the lowest level since September 2024, and below the market expectation of 7.5 million. In the first quarter of this year, the U.S. economy contracted by 0.3%, marking the first decline in three years.
Federal Reserve Chairman Jerome Powell previously warned about the complex effects of tariffs, stating that tariffs could hinder the Fed's dual goals of stabilizing prices and stimulating economic growth. He also pointed out that the Fed may face "challenges of conflicting economic objectives."
These challenges come as U.S. President Donald Trump intensifies pressure on the Federal Reserve to cut interest rates. Trump directly criticized Powell last month and threatened to fire him, but later retracted that statement.
The Federal Reserve will announce its latest interest rate decision on Wednesday local time, with the market widely expecting the Fed to remain on hold. Currently, the money market anticipates three rate cuts this year, each by 25 basis points, one less than the expectation in early April
