Goldman Sachs has projected a series of three 25 basis point interest rate reductions scheduled for July, September, and October. This forecast reflects a more dovish stance compared to current market pricing, according to the firm's chief economist, Jan Hatzius. The prediction underscores rising recession risks attributed to tariffs and uncertainties in trade policy.
Federal Reserve officials have recently emphasized the potential adverse effects of tariffs on their dual mandate. This message is expected to be reiterated by Chair Powell in the upcoming week, as highlighted by Hatzius. While the Federal Open Market Committee (FOMC) seems to demand a higher threshold for rate cuts than during the 2019 trade tensions, Goldman Sachs believes that elevated inflation would not prevent rate reductions if the unemployment rate begins to climb due to the economic impact of tariffs.
