Why Goldman Sachs (GS) Just Changed Its Fed Rate-Cut Timeline

Goldman Sachs GS -1.21% ▼ now expects the Federal Reserve to start cutting interest rates later this year, as rising oil prices driven by geopolitical tensions increase the risk of higher inflation. At the time of writing, the price of the global oil benchmark Brent (CM:BZ) is up about 4%, while West Texas Intermediate is trading near $90 per barrel, after rising more than 3% in recent trading.

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The bank said the Fed is now likely to deliver two quarter-point rate cuts in September and December. Earlier, Goldman had projected the first cut could arrive in June, followed by another reduction later in the year.

War and Soaring Oil Prices Add Uncertainty

Goldman said the change in its forecast comes as tensions in the Middle East raise the risk of higher oil prices. If oil prices rise, inflation could stay higher for longer, which may make the Federal Reserve more cautious about cutting rates soon.

The bank expects that by September there could be some cooling in the labor market along with further progress on inflation, which would support the case for rate cuts.

However, Goldman added that cuts could still come earlier if the economy weakens more quickly than expected. A weaker February jobs report has already raised concerns that hiring may be starting to slow.

For now, the Fed is widely expected to keep interest rates unchanged at its next meeting on March 17–18. Markets currently see about 41% chance of a quarter-point rate cut in September.

Is GS Stock a Good Buy?

On the Street, Goldman Sachs boasts a Moderate Buy consensus view, based on 10 analysts’ ratings. The average GS stock price target is $980.10, implying an 18.98% upside from the current price.

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