Goldman, BofA Delay Fed Rate Cut Calls on Stubborn Jobs and Inflation Data
Goldman Sachs and Bank of America are joining a growing cohort of Wall Street banks in pushing back their forecasts for Fed interest-rate cuts, citing stronger-than-expected jobs data and inflation concerns. The shift signals markets may be pricing in higher rates for longer.
RKey facts
- Goldman delays first rate cut forecast from June to December 2026
- Bank of America cites jobs and inflationThe rate at which prices rise across an economy. as forcing delayed-cuts pivot
- April CPI expectations tracking above Fed 2% target
- Morgan Stanley's Hornbach expects spicier inflationThe rate at which prices rise across an economy. print this week
- Call for higher rates for longer reshuffles sector rotation logic
What's happening
Major investment banks are abandoning their earlier pivot calls as economic data surprises to the upside. Goldman Sachs and Bank of America have both delayed their first Fed rate cut forecasts, with Goldman now calling for cuts to begin in December rather than June. The shift is grounded in a pair of economic headwinds: first, April jobs data surprised strong despite recession fears, and second, CPI expectations for April (to be released Wednesday) are tracking above the Fed's 2% target. Bank of America's analysts specifically cited jobs and inflationThe rate at which prices rise across an economy. as "last straw" data points forcing a reassessment of the rate-cut timeline.
This narrative directly contradicts the "Fed pivot is priced in" thesis that has underpinned the March-April rally. If CPI prints hot on Wednesday, it would validate the delayed-cuts thesis and could trigger a sharp repricing in rate expectations. The long-end of the Treasury curve would likely steepen, benefiting banks and short-durationBond price sensitivity to interest rate changes. value stocks while pressuring duration-heavy growth and tech names. Morgan Stanley's global head of macro strategy, Matt Hornbach, is flagging expectations for a "spicier" inflationThe rate at which prices rise across an economy. print, suggesting consensus is shifting toward a hotter reading.
The implications are broad. If the Fed remains on hold through mid-2026 or longer, cash rates stay elevated, making it harder for highly leveraged AI capex bets to justify valuations on a present-value basis. Conversely, bank net interest margins improve, supporting financial sector valuations. The near-term catalyst is Wednesday's CPI data; a miss could accelerate the pushback against rate-cut expectations, while a beat could provide relief and extend the equity rally.
What to watch next
- 01US CPI data: Wednesday 8:30 ET for first-cut timing signal
- 02Producer Prices (PPI): Thursday morning for inflationThe rate at which prices rise across an economy. persistence check
- 03Fed speakers: watch for any hawkish repricing in rate guidanceCompany-issued forecasts of future financial performance.
- BloombergTurkey Lifts Year-End Inflation Target to 24%, Citing Iran War
Turkey’s central bank revised its year-end inflation target, citing the effects of higher energy prices resulting from the US-Israeli war on Iran.
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