Strong jobs market prompts Goldman Sachs to push Fed cuts into 2027 in World Economy News 10/06/2026 Goldman Sachs has pushed its Federal Reserve rate cut forecast into 2027, saying a stronger-than-expected labor market has removed the urgency for the central bank to act this year. The bank’s economist David Mericle now expects the final two cuts in their Fed forecast to come in June and December of 2027, having previously penciled them in for December 2026 and March 2027. The revision follows a run of robust jobs data, with Goldman highlighting that trend job growth has picked up impressively in recent months. Mericle now expects the unemployment rate to rise only modestly to 4.4% this year, down from a prior forecast of 4.6%, which he thinks is “not enough to create a sense of urgency to lower rates.” “We now think that the most natural path for the FOMC is to delay further cuts until tariff passthrough, higher oil prices and other effects of the war, and the (mismeasured and overstated) effects of AI demand have faded and year-over-year core PCE inflation is closer to the 2% target,” Mericle wrote. The economist expects the combined effect of those three forces — tariffs, war-related energy prices, and AI demand distortions — to keep year-over-year core PCE inflation above 3% throughout 2026, before falling back toward 2% in 2027. Mericle sees the underlying inflation picture as softer, however, noting that wage growth is running about half a percentage point below the rate consistent with stable 2% inflation, and that leading indicators of rent growth remain very low. “As a result, we continue to expect inflation to fall to close to 2% in 2027, barring additional supply shocks,” he wrote. Touching on rate hikes, Mericle sees them as unlikely but somewhat more probable than it previously thought, putting the odds at 20%, up from 10%. Fed commentary has turned more hawkish in recent weeks, he noted, and resilient growth and employment data reduce the risk that a h