The U.S. labor market remains strong and resilient. Goldman Sachs no longer expects the Federal Reserve to cut interest rates this year.

Due to a labor market stronger than expected, Goldman Sachs economists no longer expect the Federal Reserve to cut interest rates this year. The bank has pushed back its forecast for the Fed's last two rate cuts from December 2026 and March 2027 to June and December 2027. However, Goldman Sachs Chief US Economist David Mericle wrote in a report on Friday that, considering that inflation is "unlikely to sustain itself," the possibility of the Fed raising rates remains low. Previously released US non-farm payroll data for May exceeded expectations, indicating the resilience of the labor market and raising expectations in the market that the Fed will raise rates this year to contain inflation pressure caused by the Iran war. Bond investors expect the Fed to raise rates by 25 basis points before the end of December, which caused the Nasdaq 100 index to plummet by 5% on Friday. Goldman Sachs still believes that the likelihood of a rate hike is low, but considering that Fed officials have taken a more hawkish stance and economic activity remains resilient, the probability of a small rate hike has been raised from 10% to 20%.