Goldman Sachs: The Fed may cut rates more aggressively next year; non-farm payrolls will no longer be the primary indicator.
PANews reported on December 17th that Goldman Sachs expects the Federal Reserve to be more willing to cut interest rates further next year than the market previously assumed. Josh Schiffrin, Chief Strategist and Head of Financial Risk at Goldman Sachs Global Banking and Markets, stated that Powell's press conference last week signaled growing concerns within the Fed about the sustainability of employment conditions. While the Fed's baseline scenario remains unchanged and assessing subsequent data, Schiffrin believes the threshold for additional rate cuts may be lower than pre-meeting market concerns. Schiffrin indicated that the upcoming employment reports will be key factors in determining whether the Fed resumes its easing policy, with the market focusing particularly on the unemployment rate rather than overall non-farm payroll growth. Looking ahead, Goldman Sachs expects the easing cycle to extend into 2026, with the federal funds target rate potentially falling to 3% or lower. This outlook reflects its view that inflation will remain moderate while labor market slack increases, providing the Fed with room to remove remaining policy constraints.
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