Goldman Sachs sees Fed’s first rate cut pushed back; expects 25 bp cuts in June and September

Summary

Goldman Sachs said it expects the Fed to cut its policy rate by 25 bp each in June and September this year.
The forecast suggests the U.S. Federal Reserve (Fed) could delay its first rate cut beyond the previously expected March and June timeline.
Some expect that a delay in the Fed’s first rate cut could bring short-term rate volatility and a reassessment of risk appetite.

Expectations are rising that the timing of the U.S. Federal Reserve’s (Fed) policy-rate cuts could be delayed compared with earlier forecasts.

According to Walter Bloomberg on the 12th (local time), Goldman Sachs said it expects the Fed to cut its policy rate by 25 bp (0.25 percentage point) each in June and September this year. This marks a one-step pushback from its previous scenario that called for cuts in March and June.

Goldman Sachs cited slower-than-expected disinflation and the resilience of the U.S. economy as factors behind the shift in timing. The firm said this increases the likelihood that the Fed will maintain a more cautious approach to monetary easing.

Markets are watching the revised outlook for its potential impact on the expected path of future monetary policy. If the Fed’s first rate cut is delayed, some expect financial markets to see greater short-term rate volatility along with a reassessment of risk appetite.