Goldman Sachs Forecasts Interest Rate Cuts
Goldman Sachs predicts that the Federal Reserve will deliver its next interest rate cut of 25 basis points (bps) in March 2025.
The bank stated in a note on Friday that this cut is anticipated to be followed by two additional cuts of the same size in June and September.
> "We expect the Fed to deliver its next 25bp cut in March followed by two more 25bp cuts in June and September, reaching a terminal rate range of 3.5-3.75%," the bank wrote.
Goldman also expects the Fed to slow its balance sheet runoff in January 2025 and to halt it completely by the second quarter.
Economic Growth Outlook
Goldman Sachs projects above-consensus U.S. real GDP growth of 2.4% year-over-year in 2025, attributing this to robust real income growth and improved financial conditions.
Core personal consumption expenditures (PCE) inflation is anticipated to decelerate to 2.4% by the end of 2025, supported by declining shelter inflation and lower wage pressures, although tariffs may provide a moderate inflationary lift.
Labor Market and Global Growth
The bank forecasts that the U.S. unemployment rate will gradually decline to 4.0% by the end of 2025, reflecting ongoing strength in the labor market despite economic changes.
Globally, growth is expected to reach 2.7% year-over-year in 2025, driven by improved financial conditions and higher disposable incomes.
However, Goldman notes potential risks from geopolitical developments, particularly shifts in U.S. policy, including higher tariffs on China and the automotive sector, lower immigration levels, and new tax cuts expected under the incoming Trump administration.
Eurozone and China Outlook
In the Eurozone, Goldman anticipates the European Central Bank (ECB) will continue to implement rate reductions until mid-2025. Meanwhile, China's GDP growth is expected to slow to 4.5% due to domestic challenges.
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