Goldman Sachs doesn’t think the Federal Reserve will give the markets what they want.
According to TheFly, the bank expects the next two Fed interest rate cuts to come in December 2026 and March 2027, pushing its previous timeline back by one quarter.
The rationale is obvious: inflation continues to run hot, and Goldman expects PCE inflation to hover near 3% through 2026, well above the Fed’s 2% goal.
For perspective, in the latest FOMC meeting on April 28–29, the Fed kept policy rates unchanged at 3.50%-3.75%.
On inflation, Fed Chair Jerome Powell said that,
“Inflation has moved up and is elevated, in part reflecting the recent increase in global energy prices”.
For context, since the Iran War escalated in late February, energy prices have risen sharply, with Brent Crude jumping from the low-$70s per barrel to nearly $100 per barrel in recent trading (a 35% to 45%).
Additionally, JPMorgan CEO Jamie Dimon issued a stark warning about inflation during an April 28, 2026, speech at the Norges Bank Investment Management’s Investment Conference in Oslo.
“My view is that there are a lot of inflationary things out there, including the Iran War, the re-militarization of the world, the infrastructure needs of the world, and our deficits.”
For investors, that scenario is troubling because they may have to wait longer for risk assets to get a meaningful boost and for the rally to deepen.
Consequently, the Fed needs a lot more evidence to justify a policy reset.
Goldman sees inflation delaying cuts
Goldman Sachs ’ updated forecast centers on stickier-than-expected inflation, which is still running close to 3% compared to the Fed’s 2% target.
So far, according to the bank, the Fed hasn’t gotten enough evidence that price pressures are cooling.
Goldman’s economists say that the evidence hasn’t arrived as of yet, especially with regard to energy costs feeding into broader prices.