The Federal Reserve’s monetary policy outlook is shifting dramatically, according to a revised forecast from Wall Street titan Goldman Sachs. Analysts now project the central bank will implement three 25-basis-point interest rate cuts before year-end — in September, October, and December — a significant departure from their previous forecast expecting just one cut in December.
Economic Risks Mounting
This updated projection reflects mounting headwinds facing the U.S. economy, including:
- Weaker economic data pointing to slowing growth
- A softening labor market amid hiring pullbacks
- Muted inflationary impact from recent tariffs
“The downgrade reflects long-standing fiscal pressures,” said a strategist at Morgan Stanley.
Meanwhile, Goldman’s analysts cited increased economic risks stemming from President Trump’s tariff policies, which have dampened business and household confidence. Balancing inflation control with full employment remains an acute challenge for Fed policymakers.
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Recession Probability Rising
In a notable shift, the firm raised its probability estimate for a U.S. recession over the next year to 35% — up from 25% previously. This higher assessment reflects deteriorating real economic growth indicators as trade tensions escalate.
The evolving outlook signals market expectations are quickly repricing to account for a more accommodative Fed policy stance. Historically, such adjustments have influenced investor sentiment and strategies across multiple asset classes. As economic uncertainties mount, all eyes will be on the central bank’s ability to engineer a “soft landing.”
