Global investment bank Goldman Sachs said the U.S. Federal Reserve (Fed) will not cut its benchmark interest rate this year, citing a stronger-than-expected U.S. labor market. However, U.S. President Donald Trump, ahead of the new Fed chair's first monetary policy meeting debut, pressed hard by forcefully calling for a rate hike.
On the 8th (local time), according to reports compiled from major outlets including Bloomberg and the AP, Goldman Sachs, in a report released on the 5th, sharply revised its outlook to say "the Fed will not cut rates this year." Goldman Sachs Chief Economist David Mericle pushed back the two rate cuts he had initially projected for December 2026 and March 2027 to June and December 2027, respectively. Goldman Sachs said "U.S. job growth in May far exceeded market expectations, showing strong resilience in the labor market." The bank also lowered its U.S. unemployment rate forecast for this year to 4.4% from 4.6%.
Instead, Goldman Sachs raised the probability that the Fed will slightly raise rates to 20% from 10%. It added that if investment demand related to artificial intelligence (AI) remains strong, the case for keeping borrowing expense elevated for a long time could gain traction.
As talk of rate hikes spread in the market on inflation concerns, President Trump immediately pushed back. In an interview with NBC that day, Trump said, "These days, when good indicators come out, the market actually falls on the belief that rates will be raised," adding, "There is absolutely no reason to raise rates, and we actually should cut them." The remarks were seen as a message pressuring new Fed Chair Kevin Warsh, who will preside over the first Federal Open Market Committee (FOMC) meeting on the 16th, to lower rates.
Trump went on to say, "Raising the benchmark rate is the wrong thing to do," expressing opposition to the possibility that the Fed could pivot to tightening. He said he respects Chair Warsh but added, "My view is that when the national economy is doing well, we should not punish the economy with an immediate rate hike." At the same time, he said, "We have liability, and there are other things we need to address," adding, "I want to build up the military further."