Wall Street Pushes Back Fed Cut Timeline

Goldman Sachs and Bank of America joined a growing roster of Wall Street banks this week in pushing back their Fed rate cut forecasts, now expecting cuts no earlier than December 2026 or even March 2027. Both institutions cited elevated energy prices and ongoing inflationThe rate at which prices rise across an economy. concerns as the primary rationale for the delay. The Strait of Hormuz closure has sent oil prices surging, with global markets losing 100 million barrels of supply per week as the US-Iran conflict persists; this supply shock is adding fuel to inflation expectations that were already proving sticky.

The shift underscores a critical inflection in market narrative. Just weeks ago, traders were pricing in multiple cuts through 2026. Now, the consensus has fractured. Goldman and BofA's revised calls matter because they carryIncome earned from holding a position over time. outsized influence on sell-side thinking; their moves typically signal a retrench among peers. The data backdrop has not helped dovish bets: last week's jobs report was described by strategists as a "last straw," strengthening the case for the Fed to hold steady longer.

Implications cascade across asset classes. Higher-for-longer rates support the USD and lift yields on front-end Treasuries, pressuring durationBond price sensitivity to interest rate changes.-heavy growth stocks and extending the outperformance of financials. Equity valuations that had priced in a dovish pivot face compression. Meanwhile, inflationThe rate at which prices rise across an economy.-sensitive commodities like oil and gold remain supported, even as equities wrestle with the tension between strong earnings growth and sticky rates.

The debate centers on whether current inflationThe rate at which prices rise across an economy. is truly structural or transitory. Skeptics argue that oil shocks fade once geopolitical tensions ease, and that the Fed will ultimately cut as growth slows. Supporters of delayed cuts point to wage pressure, services inflation, and the lag effects of loose fiscal policy as evidence of durability. The Trump administration's simultaneous moves to release Strategic Petroleum Reserve barrels and cut beef import tariffs signal a policy bid to ease inflation, but their efficacy remains in question.