Fed Unlikely to Cut Rates Before July Despite Trump Pressure, Says Goldman Sachs
The US Federal Reserve is not expected to lower interest rates until July, according to Goldman Sachs, despite repeated calls from former President Donald Trump to ease monetary policy.
The Wall Street bank has pushed back its forecast for the first of three anticipated rate cuts this year, which it had previously expected to begin in June.
Trump has renewed pressure on the Fed following a drop in US inflation from 2.8% in February to 2.4% in March, frequently targeting Fed Chair Jerome Powell in personal criticisms. Nonetheless, the Fed is widely expected to hold rates steady in their current range of 4.25% to 4.5% following today’s policy meeting.
Goldman’s chief economist, Jan Hatzius, acknowledged that “the mood music with China has improved” ahead of planned talks between Washington and Beijing in Switzerland. The bank anticipates that US tariffs on China could be cut from roughly 160% to around 60% in the near future, with reciprocal steps likely from China.
However, Hatzius cautioned that the path of interest rates remains uncertain, noting that recent job data showed the US added 177,000 jobs in March—exceeding expectations.
“Criticism from President Trump will not trigger a Fed policy response — neither an early cut without evidence of labour market deterioration nor a stubborn refusal to cut once the labour market does soften, provided long-term inflation expectations remain anchored,” Hatzius said.
He also voiced concern over broader threats to the Fed’s independence. “If the White House gains the ability to remove the chair and other FOMC members without ‘cause’ — defined as inefficiency, neglect of duty, or malfeasance — this would place the Fed among the least protected central banks in the developed world.”
“Academic studies and our own analysis show that reduced independence predicts worse inflation outcomes over time,” he added.
