adminGoldman Sachs added a half point to its estimation on where Fed interest rates will settle once the central bank starts cutting rates.
The bank now sees what’s called terminal fed funds rate between 3.5% and 3.75%, up from its previous stance of 3% to 3.25%.
The bank still expects rate cuts will start in the fourth quarter of next quarter, and proceed at a pace of one cut per quarter, but now they will end in the second quarter of 2026 under its new forecast.
The Fed’s own forecast, commonly known as the dot plot, assumes cuts next year and an interest rate of 2.9% in 2026.
“To summarize, we think the impact of rate hikes is mostly behind us and see rate cuts next year as optional,” said a note written by Goldman economist David Mericle.
“We think this rationale is enough to cut to 3.5-3.75% but probably not further, though the policy rate could end up lower if a growth risk emerges and the FOMC pushes back with insurance cuts.”
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