Goldman Sachs Kills 2026 Rate Cut Forecast: Fed Won't Move Until 2027 After Blockbuster Jobs Data

Goldman Sachs Buries Its 2026 Fed Rate-Cut Call — What It Means for Markets, Mortgages, and Your Money

In a note dated June 7, 2026, Goldman Sachs chief US economist David Mericle made it official: the bank no longer expects the Federal Reserve to cut interest rates at any point in 2026. The revision — moving the expected timing of the first cut from December 2026 to June 2027 — marks a significant recalibration of the firm's monetary policy outlook and reflects a broader shift in Wall Street consensus that carries real consequences for borrowers, investors, and businesses on both sides of the Atlantic and across multiple continents.

The Trigger: A Jobs Report That Stunned Everyone

The catalyst was the May 2026 non-farm payrolls report, released on June 6. The US economy added 172,000 jobs last month, a figure that dwarfed the 88,000 median forecast among economists surveyed by Reuters. The unemployment rate held steady at 4.3%, defying predictions of a modest uptick. The report painted a picture of a US labor market that remains remarkably resilient despite elevated interest rates, persistent above-target inflation driven partly by the Iran conflict's energy price shocks, and elevated uncertainty across global trade policy.

For the Federal Reserve, the data essentially removes the primary justification for any policy easing. When unemployment is low and job creation is strong, the central bank has no compelling reason to cut rates — particularly when inflation is running above its 2% target and when doing so could risk re-accelerating price pressures that are already elevated.

Goldman's New Baseline: Two Cuts, but Not Until 2027

Goldman's revised baseline calls for two quarter-point rate cuts — in June and December 2027 — down from the previous forecast of December 2026 and March 2027. However, even the new 2027 forecast carries significant uncertainty. The bank assigned a 30% probability to the two-cut scenario, down from 40% previously. This signals that Goldman views the path for monetary policy as genuinely open-ended — the Fed could cut twice in 2027 as the baseline suggests, or it could hold rates at current levels for an extended period if the economy continues to outperform.

More notably, Goldman raised the probability of a rate hike this year to 20%. Mericle noted that while the bank does not view inflation as likely to become self-sustaining in a way that would definitively require tighter policy, the strong economic starting point reduces the risk that a hike would derail growth — lowering the political and economic bar for the Fed to act if price pressures intensify further.

A Crowded Camp: Who Else Has Delayed Their Rate-Cut Forecasts?

Goldman is far from alone in this revised view. Bank of America had already dropped its 2026 rate-cut forecast in May. Nomura has been forecasting an extended hold through 2026 for several weeks. JP Morgan has similarly pushed back its expected timing for easing. The outlier on Wall Street is now Citigroup, whose chief US economist Andrew Hollenhorst continues to forecast three quarter-point cuts in 2026 — in September, October, and December — contingent on a softening in the labor market over coming months.

Citi's position makes it the last major bank holding a distinctly dovish baseline, and the May jobs data makes that outlook considerably harder to defend. The bank's case rests on its belief that the current labor strength is a lagging indicator and that hiring will slow materially in the second half of 2026 — a view that events will either validate or demolish over the next several months.

New Fed Chair Warsh Faces Immediate Test

The timing of Goldman's revision is also politically significant. Kevin Warsh, who took the helm of the Federal Reserve in 2026, now faces his first major test as chair at a time when the policy debate is genuinely divided and the external environment is highly complex. Inflation is above target due in part to exogenous energy shocks that the Fed cannot directly address through interest rates. Growth is solid. Employment is strong. Yet financial conditions have tightened meaningfully as bond markets have recalibrated rate expectations.

Wall Street observers note that Warsh's first meetings as chair will be watched with extraordinary attention for any signal about how he intends to navigate the tension between the Fed's dual mandate. Warsh is known as a hawk-leaning figure who has historically emphasised the risks of inflation over the risks of over-tightening. The strong jobs data arguably gives him additional latitude to hold rates steady or even nudge them higher without being seen as deliberately slowing the economy.

The Broader Implications for Global Markets

Goldman's revision carries implications that reach well beyond Wall Street. In the United Kingdom, the Bank of England's own rate decisions are partly calibrated against the Fed's trajectory. With the BoE already holding at 3.75% and facing its own inflationary pressures from energy prices, a Fed that stays on hold or hikes puts additional upward pressure on global bond yields — including UK gilts, which had already climbed toward 5% in May before retreating slightly.

In Australia, the Reserve Bank — which has hiked rates three times in 2026 to 4.35% — faces a similar dynamic: strong domestic labor markets and persistent inflation give policymakers little room to ease even as household finances strain under higher mortgage rates. In Canada, the Bank of Canada holds at 2.25% with its own June 10 decision looming, while in India, the RBI held its repo rate at 5.25% for the third consecutive meeting in June, citing the Middle East conflict's inflationary risks.

The common thread across all five major economies in this analysis: central banks that spent 2024 and early 2025 cutting rates are now either pausing indefinitely or — in Australia's case — reversing course. The era of monetary policy accommodation appears to be over, and Goldman's June 7 note is the most authoritative single piece of evidence yet that the market needs to fully price that reality in.

What This Means for Everyday Borrowers

For mortgage holders in the US, the practical implication is stark: variable-rate borrowers hoping for relief in 2026 will not find it. Fixed-rate mortgages remain elevated relative to the pre-2022 era, and with the 10-year Treasury yield climbing toward 4.57%, refinancing into cheaper long-term debt is not an option for most homeowners. Consumer credit card rates, which are indexed to the prime rate, will also remain at elevated levels. Business investment decisions that depend on a lower cost of capital will continue to be deferred.

For equity investors, the shift in rate expectations is perhaps the most significant macro variable of the year. The entire AI-driven bull market of 2025-2026 was partly predicated on an assumption that rates would decline, reducing the discount rate applied to future technology earnings and expanding valuation multiples. With that assumption now off the table, the repricing of high-multiple growth stocks — evident in Friday's brutal selloff — may have considerably further to run.