SKN | Goldman Sachs Extends Its Federal Reserve Rate-Hike Forecast Into 2027 as Inflation Risks Persist

Key Takeaways:

• Goldman Sachs revised its Federal Reserve outlook, now forecasting another 25-basis-point interest rate increase in March 2027 rather than expecting December 2026 to mark the end of monetary tightening.
• The bank’s chief U.S. economist, David Mericle, sees renewed inflationary pressure emerging early next year, following a temporary moderation toward the end of 2026.
• Goldman has also postponed its expected start of rate cuts to December 2027, highlighting the potential for higher borrowing costs to persist longer than previously anticipated.

Goldman Sachs has revised its Federal Reserve interest-rate outlook, identifying persistent inflation as a greater threat to the U.S. economic trajectory than previously anticipated. The bank now expects an additional 25-basis-point rate increase in March 2027, reversing its earlier assessment that the December 2026 meeting would conclude the current tightening cycle. The adjustment reflects a more cautious interpretation of inflation developments and signals that Goldman believes monetary policy may need to remain restrictive for longer.

Goldman Sachs Changes Its Forecast as Inflation Surprises Persist

The revision followed the October 2026 consumer price report, which marked the third consecutive month of upside inflation surprises. According to the U.S. Bureau of Labor Statistics, headline consumer prices increased 0.4% in October, exceeding economists’ expectations of 0.3%. Core inflation, which excludes food and energy, rose 0.3%, compared with a forecast of 0.2%.

The breadth of price increases is particularly important to Goldman’s assessment. Higher costs were not confined to energy-related categories, with food and shelter also contributing to monthly inflation. This suggests that underlying price pressures may be more persistent than an energy-driven explanation alone would indicate.

Goldman Sachs Chief U.S. Economist David Mericle expects inflation to moderate toward the end of 2026 before renewed beginning-of-year price pressures emerge in early 2027. This timing explains why the bank considers March more likely than January for its next projected increase.

Tariffs, Energy and AI Investment Complicate the Inflation Outlook

Goldman’s assessment identifies several forces contributing to the inflation environment, including higher energy costs associated with the conflict involving Iran, U.S. import tariffs, resilient consumer demand and substantial investment in artificial intelligence infrastructure.

These pressures create a complicated policy environment. Energy prices can influence transportation and production costs, while tariffs may increase the price of imported goods. Meanwhile, sustained AI infrastructure spending could support demand for electricity, construction materials, specialised equipment and labour.

The bank’s concern is that inflation could remain elevated even after the immediate energy shock begins to fade. Consequently, the Federal Reserve may need to maintain a more restrictive stance to prevent temporary price increases from becoming embedded in broader inflation expectations.

Goldman Delays Its Expected Start of Monetary Easing

The revised forecast extends beyond the next anticipated rate increase. Goldman Sachs now expects the Federal Reserve to begin cutting interest rates in December 2027, three months later than its previous projection. The bank subsequently anticipates additional reductions in March, June and September 2028.

This adjustment suggests a longer period of restrictive monetary conditions, with potential implications for corporate financing, household borrowing, commercial property valuations and fixed-income markets. Higher interest rates can also increase the opportunity cost of holding riskier assets, particularly where valuations depend heavily on future earnings growth.

What Goldman’s Forecast Means for Global Capital Allocation

For internationally diversified investors, Goldman’s revised outlook reinforces the importance of monitoring inflation persistence rather than relying exclusively on expectations for near-term monetary easing. U.S. Treasury yields, dollar funding conditions and the relative attractiveness of fixed-income assets could remain sensitive to incoming economic data.

Goldman’s forecast is a research assessment, not a Federal Reserve commitment. Future decisions will depend on inflation, employment and financial conditions. The central issue for 2027 will be whether price pressures genuinely moderate or force policymakers to maintain higher rates for longer. For a confidential discussion regarding interest-rate exposure and cross-border portfolio positioning, contact our senior advisory team.