Goldman Sachs expects three Fed rate cuts in 2025

Goldman Sachs experts predict that the Federal Reserve will cut the base rate three times by the end of this year: in September, October and December, each time by 25 basis points. Analysts expect two more declines in 2026.

The reason for the revision of the forecast was a noticeable slowdown in employment growth in the United States. According to the bank's estimates, the number of new jobs is now increasing by only 30,000 per month, while about 80,000 are needed to maintain full employment

Prior to the release of the July report, the labor market looked relatively stable, reflecting the «soft rebalancing» that the Fed had hoped for after the rate hike cycle. However, the revision of statistics has changed the picture: further adjustments to the data, according to analysts, are highly likely to be negative.

Goldman Sachs notes that employment growth outside of industries where «catch-up hiring» was observed has actually dropped to zero. At the same time, unemployment remains stable, but even a small increase in it may cause concern, as employment is already close to the maximum sustainable level.

Although the Fed could theoretically decide to cut by 50 bps at once, Goldman considers this scenario unlikely – it will require a more serious deterioration in labor market indicators.