Goldman revises Fed cut timeline as economic strength persists

Goldman Sachs postpones its Fed rate cut forecast to September, citing persistent economic resilience.

By Ahmed Azzam | @3zzamous | 24 May 2024

Market close
  • Goldman Sachs delays Fed rate cut forecast to September.

  • US inflation remains high, and economic growth is robust.

  • Treasury yields rise amid strong durable goods orders.

Goldman Sachs Group Inc. economists now predict the Federal Reserve will begin cutting interest rates in September, postponing their previous call from July due to the economy's resilience. "Earlier this week, we noted that comments from Fed officials suggested that a July cut would likely require not just better inflation numbers but also meaningful signs of softness in the activity or labor market data," economists including Jan Hatzius wrote in a note.

Goldman shifts stance

Goldman Sachs was one of the last major banks on Wall Street to expect a July rate cut. Their reversal aligns with a market consensus that policymakers will remain cautious, given the robust state of the US economy. Goldman Sachs anticipates the Fed will implement two rate cuts in total through 2024, with one per quarter. This means the second reduction is now expected in December.

Treasuries declined after data showed durable goods orders in the US rose more than expected in April, reducing hopes for a rapid easing cycle. The yield on 10-year notes increased by one basis point to 4.48%, the highest in over a week.

Nomura Securities also adjusted their forecast from July to September, citing a higher threshold for rate cuts. Goldman Sachs CEO David Solomon is even more conservative than his economists, not expecting any cuts this year.

Investor expectations

The swap market now fully prices the first Fed rate cut by December, with the likelihood of a second cut at less than 30%, down from 70% last week. At the end of 2023, the first cut was expected as early as March. Data released Thursday indicated US business activity accelerated in early May at the fastest pace in two years. Federal Reserve Bank of Atlanta President Raphael Bostic noted that monetary policy has been less effective in slowing growth compared to previous cycles, emphasizing the need to maintain higher rates to control inflation.


US Treasuries are on track for their first weekly loss this month. The yield on 10-year securities is just below the crucial 4.50% level, approximately 60 basis points higher than at the start of the year.