Goldman Sachs has pushed back its forecast for US Federal Reserve rate cuts after assessing the soft jobs data impact from December. The bank now expects two 25âbasisâpoint reductions in June and September 2026, instead of earlier calls for March and June.
Analysts at Goldman cite softer nonfarm payrolls and a gradually weakening labor market. They note progress on inflation, alongside stronger GDP, and fading tariff effects. Therefore, they see the Fed cutting later as momentum slows and risks balance.
The Bureau of Labor Statistics reported payroll gains of just 50,000 in December. Forecasters had expected a higher figure, while November was revised down to 56,000. Meanwhile, the unemployment rate fell to 4.4%, complicating the overall read.
Bond traders similarly nudged expectations toward mid-year easing after the report. Markets now price the next reduction around June, with another in the fourth quarter. This aligns with Goldman’s revised path amid soft jobs data impact and cooling activity.
Goldman’s chief US economist said the Fed will wait until mid-year to cut. He highlighted inflation falling toward the target and labor conditions finding footing. Accordingly, Goldman lowered its recession probability to 20% from 30%. The bank also projects the fed funds rate ending 2026 near 3% to 3.25%. That view reflects moderating inflation as tariff pass-through fades into mid-2026. It also assumes limited second-round effects and steady equity markets.
December’s jobs report underscored a year of weak hiring. Employers added only 584,000 jobs in 2025, the slowest outside a recession since 2003. Revisions showed deeper losses in October and modest gains in November. Sector trends remained uneven, with retail shedding jobs while leisure and health added roles. The household survey showed employment gains, yet participation declined. Therefore, the signals stayed mixed despite the soft jobs data impact.
Market-based indicators adjusted quickly after the release. Shortâmaturity Treasury yields climbed, while longâmaturity yields slipped from highs. Traders largely removed January cut hopes and looked to later dates. Economists emphasized that slower hiring does not imply imminent recession. Some noted “lowâhire, lowâfire” dynamics and cautious corporate behavior. Still, they warned that stall speed risks remain if demand weakens further.
Goldman’s updated timeline comes after earlier expectations for March and June cuts. In prior research, Goldman outlined a path to a 3%–3.25% terminal rate. Today’s move acknowledges the soft jobs data impact and evolving inflation trends.
Other institutions have also delayed their cut forecasts following the report. Morgan Stanley, Barclays, and Citigroup shifted expectations into the latter 2026. Markets mirror these changes as the labor picture remains fragile. Observers expect the Fed to maintain a cautious stance in early 2026. Policymakers will weigh inflation progress against a weakening hiring environment. Therefore, they prefer patience until data confirms sustainable disinflation.
For households, the mixed signal adds uncertainty about borrowing costs. Mortgage and auto rates may ease later than previously anticipated. Consumers could see relief only after mid-year, given the soft jobs data impact. Businesses face similar questions about planning and investment. Slower hiring may constrain growth but temper wage pressures. Firms could delay expansions until the Fed clarifies its path.
Goldman’s stance reflects a balancing act between inflation and employment. The bank sees meaningful progress masked by temporary tariff effects. It anticipates clearer disinflation once those transitory forces fade. Meanwhile, analysts will parse upcoming CPI and PCE prints closely. They will assess whether core measures continue trending toward the target. Any upside surprise could further defer the expected cuts.
In summary, Goldman Sachs now projects rate cuts in June and September 2026. The shift follows a modest payroll gain and complex unemployment dynamics. Markets and strategists broadly agree on a later start to easing. Ultimately, the Fed appears poised to wait for clearer signals. It will look for sustained disinflation and labor stabilization before cutting. That approach responds directly to the soft jobs data impact seen in December.
