Goldman Sachs Predicts Fed Rate Cuts in 2025
- Goldman Sachs predicts rate cuts, altering their previous forecast.
- Three rate cuts expected in September, October, and December.
- Weak tariff impacts and soft labor market drive changes.
Goldman Sachs predicts the Federal Reserve will cut interest rates three times in 2025, starting September, due to weaker tariff impacts and a softening labor market.
This forecast could enhance risk sentiment and potentially buoy cryptocurrency markets, affecting assets like Bitcoin and Ethereum with anticipation of Federal Reserve policy easing.
Goldman Sachs has revised its forecast, anticipating the Federal Reserve will cut interest rates three times in 2025. The decision comes as part of an accelerated timeline due to weaker-than-expected impacts of tariffs on inflation.
Fed Rate Cuts Forecast
Goldman Sachs has revised its forecast, anticipating the Federal Reserve will cut interest rates three times in 2025 due to weaker-than-expected impacts of tariffs on inflation. Led by chief economist Jan Hatzius, the Goldman Sachs research team projects rate cuts of 25 basis points, scheduled for September, October, and December. The revised forecast highlights softening labor market indicators.
Market Impact
Market impacts of these rate cuts could be substantial, notably for cryptocurrency markets. Historically, such monetary actions improve risk sentiment, leading to increased demand for assets like Bitcoin and Ethereum. The broader financial implications include anticipated shifts in asset allocation. Lower interest rates generally foster increased investment in riskier assets as investors seek higher returns. This has been seen in previous easing cycles.
“We now see three 25 basis-point cuts in September, October, and December… The main reason… is because they believe the Trump tariff strategy may not have a large, lasting impact on consumer price inflation… But the very early evidence suggests that the tariff effects look a bit smaller than we expected, other disinflationary forces have been stronger…” — Jan Hatzius, Chief Economist, Goldman Sachs
Broader Implications
The financial community may perceive these cuts as a response to macroeconomic conditions. They could stimulate investment and lending activity. Similar policy moves in past cycles led to increased crypto valuations, highlighting potential benefits. Insights from past cycles suggest that rate cuts often lead to improved liquidity conditions. Cryptocurrency markets, including Bitcoin and Ethereum, might experience price increases and heightened trading activity as investors react to market conditions.
