Goldman Sachs (GS) revises its expectations for Federal Reserve rate cuts in 2025. The analysis projects two rate cuts in June and December, a shift from an earlier forecast of three cuts. This adjustment is based on robust labor market data and persistent inflationary concerns.

The reliable labor market signals reduced urgency for rate reductions, compelling the Fed to tread cautiously. According to the new outlook, an additional cut might occur in 2026, ultimately bringing the Fed’s terminal rate between 3.5 to 3.75 percent. This revision mirrors a significant economic context that pertains to trade tariffs and inflation expectations.

Market implications suggest that sectors sensitive to interest rates, such as real estate and utilities, may face shifts in investor sentiment. Understanding these dynamics will be crucial for market participants as the Fed’s decisions influence broader economic conditions.