Experts at Goldman Sachs have predicted that the U.S. Federal Reserve is likely to reduce interest rates three times in the coming months, specifically in July, September, and October, with a total decrease of 75 basis points. This is an attempt to balance the risks of inflation and employment amidst escalating global trade tensions following the recent U.S. tariffs.
The investment bank mentioned in a report released on Monday that the Federal Reserve is expected to wait for strong and clear indicators from the labor market before making any monetary moves, even though economic surveys indicate an increasingly pessimistic outlook. The report noted that real data often takes about three months to reflect a tangible deterioration, and this deterioration has not yet occurred.
The indicators of the U.S. economy present a mixed picture; while job growth in April saw an addition of 177,000 jobs, exceeding Bloomberg's expectations, the unemployment rate remained steady at 4.2%. On the other hand, U.S. consumer confidence sharply declined, with the index falling to 86 points in April, the lowest level in 13 years, driven by increasing concerns about tariffs that have become a top concern for citizens.
In contrast, the number of job openings announced fell to 7.19 million by the end of March, the lowest level since September 2024, and below expectations of 7.5 million. The first quarter of the year also witnessed an economic contraction of 0.3% year-on-year, marking the first decline in GDP in three years.
U.S. Federal Reserve Chairman Jerome Powell had previously warned of the complex effects of tariffs, considering that they could hinder the central bank's ability to achieve its dual goals of price stability and stimulating economic growth. He also noted the possibility that the Federal Reserve may face a "challenging scenario in which economic goals conflict."
These challenges come amidst increasing pressure from President Donald Trump on the Federal Reserve to lower interest rates, as he directly criticized Powell last month and threatened to fire him, before later retracting that statement.
