FOMC Roundtable

Goldman Sachs anticipates the FOMC will adopt a more balanced policy stance as economic projections show higher 2026 inflation and lower GDP growth. The firm maintains a dovish outlook, projecting no 2026 rate hikes and two cuts in 2027.

Key Takeaways

• 1.The FOMC is expected to move toward balanced guidance by removing forward-looking language regarding additional rate adjustments.
• 2.Rate hikes remain unlikely as the Fed historically avoids reacting to oil price shocks, provided they do not lead to self-sustaining high inflation.
• 3.Goldman Sachs forecasts two final rate cuts in 2027, maintaining a more dovish stance than current market pricing.

Table of Contents

• The Recent Pick-Up in Job Growth Has Provided Reassurance About the Labor Market Outlook
• The Combined Effect of Increases in Tariffs, Oil Prices, and Computer Memory Prices Is Likely to Hold Roughly Steady and Keep Year-over-Year Core PCE Inflation Above 3% All Year but Should Fade in 2027
• We See Rate Hikes as Unlikely Because the Fed Tends Not to Hike in Response to Oil Shocks and Because the Oil Shock Is Less Likely to Spark Self-Sustaining High Inflation in a More Balanced Labor Market
• Concerning Signals from Inflation Expectations or the Breadth of High Inflation Across Categories Would Make Hikes More Likely
• We Expect the FOMC to Shift to Balanced Guidance by Removing “the Extent and Timing of Additional” from Its Guidance
• The Economic Projections Are Likely to Show Lower GDP Growth, Slightly Lower Unemployment, and Considerably Higher Headline and Core Inflation in 2026
• We Expect the Median Dot to Show No Change in 2026 and One Cut in Each of 2027 and 2028
• Our Baseline Fed Forecast Calls for Two Final Cuts in June and December 2027

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