Goldman Sachs expects the Federal Reserve to cut interest rates three times in the second half of this year, as US economic growth and employment were impacted, GDP growth rate declined and unemployment rate rose, but inflation also puts pressure on interest rate cuts.
At a time when the economic situation is changing, a prediction from Goldman Sachs has attracted widespread attention. According to Wall Street Journal reporter Nick Timiraos, Goldman Sachs expects the Federal Reserve to cut interest rates three times in the second half of this year. Behind this forecast is concerns about the impact of economic growth and employment.
Goldman Sachs also raised its expectations for the growth rate of core personal consumption expenditure (PCE) this year, rising from 3.0% to 3.5%. The change in this data reflects an increase in inflationary pressures faced by the U.S. economy. The key factor that prompted Goldman Sachs to make the forecast of the Federal Reserve's three interest rate cuts in the second half of the year is the impact on economic growth and employment.
From the perspective of economic growth, the current economic growth trend of the United States is not optimistic. Recently, a series of policies of the US government, such as Trump's tariff policy, have put pressure on economic growth. Goldman Sachs economists team pointed out that tariff policies have led to higher corporate costs and lower investment intentions, which has dragged down overall economic growth. Goldman Sachs has lowered its forecast for the fourth quarter of 2025 U.S. GDP growth by half a percentage point to 1%. Against this backdrop, the possibility of the Federal Reserve stimulating economic growth by cutting interest rates has increased significantly. Rate cuts can reduce the financing costs of enterprises, encourage enterprises to expand investment, and promote economic activity.
Employment is also not optimistic. As economic growth slows down, the pace of expansion of enterprises has stagnated or even contracted, which has directly affected the employment market. Goldman Sachs raised its unemployment rate forecast by 0.3 percentage points to 4.5%. The rise in the unemployment rate means that more people are facing unemployment risks, and their consumption capacity will also decline, further curbing economic growth. In order to stabilize the job market, the Federal Reserve has stimulated the economy by cutting interest rates and created more job opportunities, which has become a reasonable policy choice.
However, the Fed's interest rate cut is not without worries. Despite challenges in economic growth and employment, rising inflation expectations have also put pressure on the Fed. Goldman Sachs pointed out that while the Fed leadership has downplayed the rise in inflation expectations so far, it does raise the threshold for interest rate cuts. Especially when the inflation rate is higher than the target level, interest rate cuts may further push up inflation and form a vicious cycle.
Goldman Sachs expects the Federal Reserve to cut interest rates three times in the second half of the year to be based on a comprehensive consideration of the impact on US economic growth and employment. However, in the actual decision-making process, the Federal Reserve needs to weigh many factors such as economic growth, employment and inflation. The market is waiting to see where the US economy will go in the future and how the Federal Reserve will make decisions.
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