Goldman Sachs: Fed Expected to Hold Rates Steady at June Meeting
Taylor Wilson
Goldman Sachs expects the Fed to hold rates steady at its June meeting and drop language hinting at cuts; despite a sharp rebound in jobs data sparking rate-hike talk, Goldman judges a hike is unlikely.
Jobs rebounded — so why is the market talking about hikes?
Since the last FOMC meeting, the biggest shift has been a sharp rebound in job growth, putting the labor market on a firmer footing.
This means → the market's focus has flipped from "when will they cut?" to "is inflation bad enough to justify a hike?" — a rapid change in direction.
In plain terms = the job market looks too strong, raising fears the economy could overheat and push prices higher.
Why does Goldman say a hike is unlikely?
Reason one: the Fed has historically not raised rates in response to oil-price shocks — it tends to wait and watch rather than tighten.
Reason two: current conditions lower the probability that an oil-price shock triggers self-reinforcing high inflation — the spiral where rising prices push up wages, which push prices higher still.
Goldman flags one reversal condition: if inflation expectations rise significantly, or if high inflation spreads from a few categories to many, the odds of a hike would increase.
What will change in the June statement?
Goldman expects the FOMC to hold the federal funds rate unchanged.
The key change is in the wording: the statement will drop the phrase "the extent and timing of additional adjustments."
This means → that phrase was the Fed's signal that cuts were still on the table; removing it formally withdraws forward guidance on rate cuts.
What does the dot plot signal?
Goldman expects the median dot to show the federal funds rate unchanged through 2026, but with three officials projecting a hike later this year.
The median still points to two eventual rate cuts, most likely landing in 2027 and 2028.
Goldman also assumes new Chair Warsh will not submit a dot — he has publicly criticized forward guidance in the past, consistent with his long-held stance.
This reflects a split beneath the surface: even as the overall message is "hold steady," a hawkish minority is laying the groundwork for a hike.
Content is for reference only, not financial advice.