BofA and Goldman Delay Fed Rate Cut Forecasts as Inflation and Jobs Stay Strong

Major Wall Street firms are pushing back expectations for U.S. interest rate cuts as inflation risks rise and the labor market remains strong. BofA Global Research now expects the Federal Reserve to keep rates unchanged throughout 2026, forecasting two quarter-point cuts only in July and September 2027. Goldman Sachs also delayed its outlook, now predicting the first rate cut in December 2026 instead of September, followed by another reduction in March 2027. The changes come after the Middle East war pushed energy prices higher, increasing concerns that inflation could remain elevated for longer. Fresh U.S. data strengthened the case for the Fed to stay cautious. Employment growth in April beat expectations while the unemployment rate held steady at 4.3%, signaling continued strength in the economy. The Federal Reserve also kept rates unchanged at its April 29 meeting in a closely divided 8-4 vote, the narrowest split since 1992. Analysts said inflation remains far above the Fed’s 2% target, while traders expect rates to stay between 3.50% and 3.75% through the end of the year. BofA added that incoming Fed Chair Kevin Warsh may support lower rates later, but current economic data does not justify cuts yet.