Goldman Sachs delays interest rate cuts by 3 months: the policy dilemma of sticky inflation and strong employment

In 2024, there was a key adjustment in Wall Street’s assessment of the Federal Reserve’s policy path. Goldman Sachs significantly delayed its initial rate cut expectations, pushing the timing from March to June, and now anticipates a further cut in September, with each cut being 25 basis points. This adjustment was quickly highlighted by analyst Walter Bloomberg on the X platform, immediately drawing market attention. From that perspective, it represented an important policy re-pricing and laid the groundwork for understanding the subsequent evolution of the interest rate cycle.

Why Did Goldman Sachs Suddenly Change Its Tune?

Goldman Sachs’ adjustment was not a sudden whim but based on a systematic reassessment of the macro environment. At that time, the Federal Reserve maintained the benchmark interest rate in the 5.25% to 5.50% range, at multi-decade highs. Against this backdrop, the key question became: When is the appropriate time to cut rates?

Goldman Sachs’ answer was “wait a bit longer.” The specific reasons point to two core factors:

Inflation Has Not Yet Stabilized and Declined

Although inflation data shows a downward trend, it has not yet stabilized at the Fed’s 2% target. More critically, inflation in the services sector exhibits clear stickiness, implying that inflation may not be as tame as surface data suggests. In this context, prematurely adopting easing policies risks a reversal—i.e., after a rate cut, inflation could rise again, forcing the Fed to tighten again. Such a scenario would have a greater impact on financial markets.

Employment Market Resilience Surpasses Expectations

The strong performance of the labor market is another key support. Data indicates that employment is outperforming expectations, and consumer spending remains stable. A robust job market suggests economic resilience, which diminishes the urgency to cut rates immediately. From the Fed’s perspective, when the economy is still lively, maintaining higher rates can reserve policy space for potential shocks in the future.

Policy Signals

Federal Reserve Chair Jerome Powell has repeatedly emphasized a “data-dependent” decision-making approach and explicitly stated the need for greater confidence in the continued decline of inflation. This is not mere rhetoric but directly supports assessments from institutions like Goldman Sachs. Several FOMC members have also expressed similar attitudes, forming a consensus on policy expectations.

In other words, Goldman Sachs’ judgment aligns with the Fed’s policy tone, enhancing the credibility of its forecast.

The Dual Impact on Markets

What does delaying rate cuts imply? From the borrower’s perspective, it means borrowing costs remain elevated for a longer period, profoundly affecting consumer credit, corporate financing, and asset pricing. A high-interest-rate environment typically depresses the attractiveness of overvalued assets such as growth stocks and cryptocurrencies.

However, from another angle, maintaining high rates helps solidify inflation expectations and enhances the appeal of dollar-denominated assets. Related data shows that the USD index achieved four consecutive increases by January 2026, and gold prices returned to the 4500 mark, reflecting how a high-rate environment supports traditional safe-haven assets.

Lessons from the Review

Goldman Sachs’ judgment at the time has since aligned with the adjustments made by many other institutions. Looking back from 2026, this policy re-pricing has become an important reference point for understanding the evolution of the subsequent interest rate cycle. Especially given the ongoing macroeconomic uncertainties, this “data-driven, cautious approach” remains practically significant.

Summary

Goldman Sachs’ delay in rate cuts essentially reflects a policy dilemma: inflation is declining but not yet stable, employment remains strong but may be overheating. In such a context, rushing is not advisable. This judgment drew widespread market attention at the time and laid the foundation for subsequent policy developments. From the perspective of 2026, this turning point reminds us that policy adjustments are rarely linear but are gradually advanced through a game of data, expectations, and actual conditions. For investors, understanding this evolution of policy logic is more valuable than merely predicting specific timing for rate cuts.