US Federal Reserve may skip cutting interest rates in January
Goldman Sachs economists have predicted that the US Federal Reserve will signal a slowdown in its easing pace at the next meeting. Although markets expect a 25 basis-point rate cut on Wednesday, Goldman Sachs predicts that the Fed will not cut interest rates in January. This is based on unemployment falling below the Fed's 2024 predictions and inflation remaining above target.
Fed's approach to rate cuts
Economists, including Jan Hatzius, have noted a clear intent from the Fed to slow the pace of rate cuts. They expect the Fed's statement to emphasize both this deceleration and a commitment to data-driven decisions. Market pricing backs this view, with a 90% chance of a cut this week but mostly discounting another one in January.
Goldman Sachs's future rate cut predictions
Goldman Sachs, however, stands by its forecast of further cuts in March, June, and September 2025. The economists expect a slightly higher terminal rate of 3.5%-3.75%. They called their forecasts "somewhat more dovish than market pricing," citing possible policy changes under the second Trump administration as factors influencing interest rate risks.
