• A December rate cut by the Federal Reserve remains Goldman Sachs Asset Management's base case, driven by soft labor data and inflation near target.
  • Fed Chair Powell is expected to maintain a data-dependent, risk-management approach to policy through the end of his term in May 2026.
  • GSAM forecasts additional easing in 2026, with the current environment supporting opportunities in credit and securitized bond markets.

A December interest rate cut from the Federal Reserve remains the most probable outcome, according to Kay Haigh of Goldman Sachs Asset Management, who points to persistent softness in the labor market and inflation trending close to the central bank's 2% target as the primary catalysts for further policy easing.

"The setup allows Chair Powell to continue his risk-management approach," Haigh, co-head of global fixed income at GSAM, said in the firm's latest market commentary, referencing the period before Powell's term concludes in May 2026. This perspective comes even as some Fed officials have recently struck a more hawkish tone in public remarks, creating a divergence between market expectations and official communications.

The case for easing rests heavily on recent employment figures. Nonfarm payrolls have shown clear signs of deceleration, and downward revisions to previous months' data have highlighted underlying fragility. With core CPI recently cooling from 3.1% to 2.8%, the inflation picture has become less of a barrier to action, allowing labor market concerns to take priority in the Fed's policy calculus.

Goldman Sachs Asset Management, which oversees more than $2 trillion in client assets, is forecasting the Fed will lower its benchmark rate by 25 basis points in both October and December of this year, followed by additional cuts in 2026. This anticipated path is intended to counterbalance economic softness and support U.S. growth.

People familiar with the matter at GSAM noted that the firm's research team sees the Fed's current strategy as fundamentally flexible, designed to adjust policy as new data arrives. While potential inflationary pressures from ongoing tariff disputes present a risk, they are not currently viewed as sufficient to derail the easing cycle given the more immediate signals from the jobs market.

The lower-rate environment is expected to broadly support interest-sensitive sectors. GSAM highlights particular strength in corporate and securitized credit markets, where tight valuations and low default rates have created resilience. The firm expects this strength to continue if the projected rate cuts materialize, though investors remain alert for late-cycle risks.

When reached for additional comment on the timing of future cuts, a spokesperson for Goldman Sachs Asset Management declined to elaborate beyond the published commentary. The Fed's own communications have deliberately remained data-dependent, offering no explicit forward guidance on the precise timing of policy moves.

Correction: An earlier version of this article misstated the timeline for anticipated rate cuts. GSAM forecasts cuts in October and December 2025, not 2024.