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Goldman Sachs delays Fed cut outlook to December 2026 as Iran war drives US inflation
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Goldman Sachs delays Fed cut outlook to December 2026 as Iran war drives US inflation
May 10, 2026 10:48 PM

May 11 (Reuters) - Goldman Sachs ( GS ) has pushed back its forecast of U.S. Federal Reserve rate cuts to December 2026 and March 2027 from its previous outlook of cuts in September and December this year, saying high energy prices would likely keep inflation elevated.

A host of global brokerages have pared back expectations for U.S. rate cuts in 2026, split between some easing and no cuts at all, as the ongoing 10-week-old Middle East war has pushed energy prices higher and left policymakers cautious about inflation risks.

"With energy cost passthrough likely to keep year-over-year core PCE inflation closer to 3% than 2% all year, we think that a combination of lower monthly inflation prints after the oil shock fades and further labor market softening will likely be needed for the FOMC to cut this year," the brokerage said in a note dated May 8.

The Fed held rates steady at its April 29 meeting in an unusually divisive 8-4 vote, the closest since 1992. U.S. inflation remains well above the Fed's 2% target.

Traders expect the central bank to hold interest rates steady in the 3.50% to 3.75% range until the end of the year as per the CME Fedwatch tool.

"If the labor market does not weaken sufficiently this year, we would instead expect the FOMC to deliver two final cuts in 2027, when we expect core inflation to return to the 2% target," Goldman Sachs ( GS ) said.

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