Goldman, BofA push Fed rate cuts to late 2026

Goldman Sachs and Bank of America have joined a growing chorus of Wall Street institutions pushing back their projections for Federal Reserve rate cuts, now targeting December 2026 or March 2027 rather than earlier in the year. The shift reflects mounting concern that the 10-week conflict in the Middle East has created a persistent supply shock through the Strait of Hormuz closure, driving crude prices higher and complicating the Fed's inflationThe rate at which prices rise across an economy.-fighting strategy.

Aramco has warned that global oil markets are losing 100 million barrels every week the Strait remains shut, compounding supply losses that have already made this the most significant oil disruption since the supply crisis of the 1970s. Goldman specifically cited elevated energy prices as the primary reason for pushing cuts further out. Central banks globally, including China's PBOC, have warned of imported inflationThe rate at which prices rise across an economy. risks from oil and commodity price spikes, raising the bar for monetary easing.

The delayed cut outlook pressures rate-sensitive sectors including technology, real estate, and consumer discretionary names that have priced in earlier relief. Equity valuations, which have been climbing on the assumption of imminent rate cuts, face headwinds if the Fed stays higher for longer. Fixed-income investors are reassessing durationBond price sensitivity to interest rate changes. exposure, with bond yields climbing as expectations for cuts recede. Energy names benefit from elevated prices, but importers and manufacturers with tight margins face margin compression.

Sceptics argue that falling growth data or a sharp earnings miss could force a faster pivot, and some market participants question whether geopolitical disruptions will persist as long as consensus now assumes. If the Strait reopens or a ceasefire takes hold in the coming months, the rate-cut narrative could reverse sharply, creating whipsaws for positioning.