By Fabiana Negrin Ochoa
Goldman Sachs has pushed out its Federal Reserve rate-cut forecast to 2027, citing a stronger-than-expected U.S. jobs market.
Consensus-beating labor data last week has revived views that interest rates will stay higher for longer, accelerating a selloff in technology stocks.
Renewed escalation in the Middle East as Iran and Israel exchange strikes has added to fears about inflation, reinforcing hawkish bets.
The risk-off mood has hit technology and artificial-intelligence stocks particularly hard. Tech-heavy indexes in Asia, including South Korea's Kospi and Taiwan's Taiex slumped Monday following a negative lead from Wall Street on Friday.
In its note published Friday, Goldman Sachs said it still sees rate hikes as unlikely, but "somewhat more likely than we initially thought."
GS's U.S. economics team noted that Fed commentary has turned more hawkish, while resilient activity and employment data lower the bar for monetary tightening, reducing the risk that a hike could end up looking like a costly error.
"But we have not yet seen signs that the inflation shock from the war is broadening out," they said. "With the labor market in balance and wage growth running below the rate compatible with 2% inflation, the inflation shock looks less likely to become self-sustaining."
Given that, the most natural path for the Fed is to delay rate cuts until the effects of tariffs, the war and AI demand have faded, GS said.
It now sees the final two rate cuts happening in June and December of 2027, versus the December 2026 and March 2027 slots forecast previously.
The GS team still expects somewhat below-potential economic growth in the second half of this year as high oil prices weigh on spending, but projects that the unemployment rate will rise only a touch further--not enough to create a sense of urgency to ease monetary settings.
Write to Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com
(END) Dow Jones Newswires
June 08, 2026 00:27 ET (04:27 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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