June 8 (Reuters) - Goldman Sachs ( GS ) expects the U.S. Federal Reserve to keep rates unchanged through 2026 and delay rate cuts until 2027, it said on Friday, citing stronger economic activity and job growth after a robust payrolls report.

The brokerage now expects rate cuts in June and December 2027, instead of the 25-basis-point reductions it had forecast for December 2026 and March 2027.

The change followed a stronger-than-expected U.S. jobs report , which pointed to renewed labor market strength and gave the Federal Reserve more room to keep rates steady despite inflationary pressures from the Middle East conflict.

Goldman joins a growing number of firms expecting a prolonged pause, with  Nomura  also forecasting last month that the Fed would remain on hold through 2026.

"The resilient activity and employment data also lower the bar for a rate hike, less because they suggest a risk of overheating than because a stronger starting point for the economy reduces the risk that a hike could end up looking like a costly mistake," Goldman said in a note.

The brokerage added that while rate hikes remain unlikely, they are slightly more plausible than previously thought. 

Goldman Sachs ( GS ) said it now sees the most likely path for the Fed as delaying rate cuts until the effects of tariffs, higher oil prices linked to the Iran conflict and other war-related pressures fade, and until year-over-year core PCE inflation moves closer to the 2% target, alongside a cooling in what it views as overstated AI-driven demand.

Traders expect the central bank to deliver rate hikes with a 75.5% probability by the end of the year, according to the CME FedWatch tool.