Goldman Sachs predicts that the Federal Reserve will implement its next interest rate cut of 25 basis points (bps) in March 2025.
In a note issued on Friday, the bank expects the move to be followed by two more similar rate cuts in June and September.
“We expect the Fed to implement its next 25bps cut in March, followed by two more 25bps cuts in June and September to a final rate range of 3.5-3.75%,” Goldman Sachs said.
Goldman also predicts that the Fed will slow its balance sheet reduction in January 2025 and stop it completely by the second quarter.
Goldman Sachs also forecasts that US real GDP growth will exceed expectations, at an annual rate of 2.4% in 2025. The main factors driving this growth are strong real income growth and loosening financial conditions.
Core personal consumption expenditure (PCE) inflation is expected to ease to 2.4% by the end of 2025, driven by lower housing inflation and easing wage pressures. However, tariffs are expected to have a modest inflationary impact.
Meanwhile, the US unemployment rate is expected to decline gradually, reaching 4.0% by the end of 2025, reflecting continued strength in the labour market despite economic changes.
Goldman also said that global growth is expected to reach 2.7% per annum in 2025, driven by looser financial conditions and rising disposable incomes.
However, the firm highlighted risks from geopolitical developments, particularly US policy changes including higher tariffs on China and the auto sector, reduced immigration, and new tax cuts under the incoming Trump administration.
In the Eurozone, Goldman expects the European Central Bank (ECB) to continue rate cuts until mid-2025, while China's GDP growth is forecast to slow to 4.5% due to domestic challenges.
