Goldman Sachs shifted its rate-cut outlook to mid-2026. The bank now targets reductions in June and September 2026. Earlier, it expected cuts in March and June. Its analysts assess the soft jobs data impact as meaningful. They cite weaker nonfarm payrolls and a cooling labor market. They also note progress on inflation alongside solid GDP.
Furthermore, they see fading tariff effects into mid-2026. Therefore, they favor later cuts as momentum slows. This reassessment balances inflation gains with employment fragility.
The Bureau of Labor Statistics reported 50,000 payroll gains in December. Forecasters had looked for a stronger increase. Additionally, November was revised down to 56,000. Meanwhile, unemployment fell to 4.4%. That decline complicates the overall read on Slack.
Nevertheless, wage growth appears less intense than earlier peaks. Markets reacted to the soft jobs data impact rapidly. As a result, traders moved expectations toward mid-year easing. This trajectory aligns with Goldman’s adjusted plan.
Bond traders now price a June reduction firmly. They also expect a further cut in the fourth quarter. Consequently, market pricing echoes Goldman’s revised view. The soft jobs data impact remains central to reasoning. Goldman’s chief US economist expects patience until mid-year. He highlights inflation nearing the Fed’s target. He also points to steadier labor conditions emerging. Accordingly, Goldman lowered recession odds to 20% from 30%. Moreover, the bank projects the fed funds rate near 3% to 3.25% by 2026. That assumption reflects moderating inflation as tariff pass-through fades. It also assumes limited second-round effects and stable equities.
December’s figures capped a weak hiring year. Employers added 584,000 jobs in 2025. That was the slowest pace outside a recession since 2003. Revisions showed deeper October losses and modest November gains. Sector performance remained uneven across industries. Retail shed jobs, while leisure and health expanded. The household survey showed gains and lower participation. Therefore, signals stayed mixed despite the soft jobs data impact. Policymakers face nuanced tradeoffs in this environment.
Market indicators adjusted quickly after the release. Short-term Treasury yields climbed on repriced risks. However, longer-term yields slipped from prior highs. Traders largely removed hopes for a January cut. Instead, they looked to later windows for easing. Economists argued that slower hiring does not guarantee a recession. Some described “low hire, low fire” corporate behavior. Still, they warned of stall-speed risks if demand fades. Consequently, caution drives strategy into mid-2026.
Goldman’s update replaces expected cuts in March and June. Prior research suggested a 3% to 3.25% terminal rate. Today’s change recognizes the soft jobs data impact. It also reflects evolving inflation and tariff dynamics. Other banks delayed cut forecasts as well. Morgan Stanley, Barclays, and Citigroup shifted into late 2026. Markets mirrored these recalibrations amid fragile hiring. Observers expect a cautious policy early in 2026. Therefore, the Fed will weigh inflation against employment softness. It will wait for durable disinflation before acting.
Households now face borrowing cost uncertainty. Mortgage and auto rates may ease later than planned. Consumers could see relief only after mid-year. Businesses confront similar planning challenges. Slower hiring may temper wages and restrain growth. Consequently, firms may delay expansions pending clearer guidance. The soft jobs data impact informs these choices.
Goldman frames policy as a balancing act. It sees progress on inflation masked by temporary tariffs. It expects clearer disinflation as those effects fade. Meanwhile, analysts will scrutinize CPI and PCE trends. They will test whether core measures continue cooling. Any upside surprise could push cuts further out. Ultimately, Goldman projects June and September 2026 cuts. That shift follows modest payroll gains and complex unemployment dynamics. Markets and strategists broadly agree on later easing. The Fed appears ready to wait for stronger signals. It will seek sustained disinflation and steadier labor before cutting.
