Goldman Sachs: Fed Rate Cut in December Is Now a Foregone Conclusion

Jinse Finance reported that Goldman Sachs stated the Federal Reserve is almost certain to lower interest rates at the policy meeting on December 9-10. The current market pricing probability for a 25 basis point rate cut has reached about 85%—86%. Goldman Sachs’ fixed income team pointed out that a weakening job market and the need for policy risk management are the key factors prompting the Fed to turn earlier, and with no major data expected to change this direction, this rate cut is almost a foregone conclusion. Although the increase in new jobs in September was 119,000, better than market expectations, signs of weakness in the labor market are becoming increasingly evident: the unemployment rate has risen to 4.4%, the highest since October 2021; the unemployment rate for college graduates aged 20 to 24 has reached 8.5%. Goldman Sachs analysts Rikin Shah and Cosimo Codacci-Pisanelli wrote in their report that this group accounts for 55% to 60% of U.S. labor income, and their employment pressure has a significant impact on the overall economy. Corporate layoff warnings (WARN), the Challenger layoff report, and the number of layoff mentions in Q3 earnings calls all reflect that labor demand is slowing. New York Fed President Williams stated on November 21 that there is “further room for adjustment” in the policy stance in the short term, almost confirming the direction of this meeting. San Francisco Fed President Daly also expressed support for a rate cut on November 24, believing that the labor market is “sufficiently fragile” and that excessive tightening could bring the risk of nonlinear changes. Goldman Sachs expects the federal funds rate to fall to 3%—3.25% by mid-2026, and also expects further small rate cuts in March and June next year. In addition, Goldman Sachs recommends taking a short position in U.S. 10-year Treasury bonds as the main trading strategy in the first quarter of 2026, as fiscal stimulus is expected to bring growth. The Goldman Sachs team concluded that, in the context of a data vacuum and high market consensus, this rate cut has basically been “locked in” in advance.