New York, June 7, 2026, 17:02 (EDT)
- Goldman Sachs has dropped its call for Federal Reserve rate cuts this year following better-than-expected jobs data, Bloomberg said.
- U.S. employers added 172,000 jobs in May, while the jobless rate stayed at 4.3%, according to the Labor Department.
- Citi is still the outlier. The bank sticks with its call for three 25 basis-point cuts, looking for moves in September, October and December.
Goldman Sachs no longer expects a U.S. rate cut this year, toughening its stance after more solid jobs numbers. That follows other Wall Street desks stepping back from bets on easier policy. Investors now look at whether the Fed holds or even hikes, not just when it might cut.
Timing is key here. Kevin Warsh, the new Fed Chair, is set for his first policy meeting June 16-17. Friday’s payroll report eased job worries for officials, letting them keep their attention on inflation.
U.S. employers added 172,000 jobs in May and the unemployment rate held at 4.3%, the Labor Department reported. Leisure and hospitality, local government, and health care each posted job gains. Financial activities saw job losses.
Tech took a hit as the Nasdaq dropped 4.18% Friday. The S&P 500 was down 2.64%. Philadelphia’s semiconductor index posted its sharpest one-day fall since March 2020. CME’s FedWatch tool showed traders see a 42.7% chance of a December rate hike, according to Reuters.
Goldman is pushing back its forecast for Fed cuts, following a broad trend across Wall Street. Reuters said in May that Bank of America saw no Fed cuts this year. Back then, Goldman still expected rate cuts in December 2026 and March 2027. That December 2026 cut has now been dropped.
Citi is betting on more cuts. Citigroup economists, with chief U.S. economist Andrew Hollenhorst at the helm, are still forecasting three Fed rate cuts this year, each by 25 basis points, at the September, October and December meetings. Hollenhorst is looking for the labor market to weaken in the next few months, according to reports that cite Bloomberg.
That’s become a rare view. A Reuters commentary last month pointed out Citi and MUFG are almost alone now in predicting aggressive Fed action this year, citing their take on the labor market as “stable, but fragile.” Back then, Hollenhorst and his group said weaker growth and tepid hiring probably wouldn’t push inflation high enough for the Fed to hike. Reuters
Markets had expected fewer bumps. Goldman President and COO John Waldron told CNBC last week “exuberance” fit equity markets, as he talked about when that exuberance tips into irrational, the AI race, and IPOs. DDH Research
Friday exposed how little support was left. “After the record run we’ve seen the last nine weeks in equities, specifically tech and semiconductors, the dam just broke today,” Ryan Detrick, chief market strategist at Carson Group, told Reuters. He said the jobs report left the Fed “in a tough spot” if it wants to cut rates this year. Reuters
Fed officials aren’t making much effort to contradict that take. Cleveland Fed President Beth Hammack said the economy was close to what she sees as full employment and called inflation “high, moving higher.” Fed Governor Christopher Waller said he’s not ruling out more rate hikes if inflation doesn’t come down. Reuters
Inflation is still the risk that won’t quit. The International Monetary Fund last week said it now thinks inflation will hit the Fed’s 2% target by end-2027, pushing out the timeline. The delay was blamed on energy shocks and tariffs. “We do see sort of upside risk to inflation,” IMF spokesperson Julie Kozack said. Reuters
But the outlook could still change. If jobs data weakens fast, Citi’s call might not look so out of step. Another burst of inflation—maybe from energy, higher tariffs or wage gains—could tip things toward no Fed cuts or even a hike. Goldman’s new outlook fits the consensus trade for now. But nothing is settled yet.
That’s the tough part for markets. AI-related stocks, IPO sentiment, and big tech have all traded up in part because traders bet policy would ease. But with Goldman stepping back, markets are now looking at the chance that support doesn’t come this year.
