Investing.com -- Goldman Sachs predicts that the Federal Reserve will deliver its next interest rate cut of 25 basis points (bps) in March 2025.
The bank said in a note Friday that the move is expected to be followed by two additional cuts of the same magnitude in June and September.
"We expect the Fed to deliver its next 25bp cut in March followed by two more 25bp cuts in June and September to a terminal rate range of 3.5-3.75%," the bank wrote.
Goldman also anticipates that the Fed will slow its balance sheet runoff in January 2025 and halt it entirely by the second quarter.
Goldman Sachs projects above-consensus U.S. real GDP growth of 2.4% year-over-year in 2025, citing robust real income growth and easing financial conditions as key drivers.
Core personal consumption expenditures (PCE) inflation is expected to decelerate to 2.4% by the end of 2025, aided by cooling shelter inflation and easing wage pressures. However, tariffs are forecasted to provide a moderate inflationary boost.
Meanwhile, the bank says the unemployment rate in the U.S. is projected to decline gradually, reaching 4.0% by the end of 2025, reflecting continued strength in the labor market despite the economic shifts.
Goldman notes that global growth is expected to reach 2.7% year-over-year in 2025, driven by easing financial conditions and rising disposable incomes.
However, the firm highlights risks from geopolitical developments, particularly U.S. policy shifts, including higher tariffs on China and autos, lower immigration, and new tax cuts under the incoming Trump administration.
In the Eurozone, Goldman expects the European Central Bank (ECB) to continue rate reductions until mid-2025, while China’s GDP growth is forecast to slow to 4.5% amid domestic challenges.