Goldman Delays Fed Rate Cut Timing

Goldman Sachs has pushed back its Fed rate cut forecast to late 2026 due to AI-related inflation distortions and strong labor data, even as it lowers recession odds to 25%.

Key Takeaways

• 1.Fed rate cut expectations have been delayed to December 2026 and March 2027 due to sticky inflation and labor market strength.
• 2.The 12-month US recession probability has been reduced to 25% from 30% as economic activity remains resilient.
• 3.AI software pricing is creating a distortion in PCE inflation, artificially boosting the core rate by an estimated 0.4pp.

Table of Contents

• Oil Price Risks Still Skewed to the Upside
• Recession Risk Looks Incrementally Lower
• Software Is Yet Another Transitory Inflation Shock
• Fed Cuts on a More Delayed Schedule

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