Goldman Sachs Expects FOMC to Cut Rate in September Despite Hawkish Dot Plot

The Federal Reserve decided to maintain the current interest rates within the range of 5.25% to 5.5% but adjusted its projection for rate cuts to only one in 2024.

Policymakers at the central bank acknowledged that there has been some progress towards achieving the 2% inflation target. During a press conference, Federal Reserve Chair Jerome Powell stated that the central bank is not yet fully convinced about the need to reduce rates, despite a decline in inflation levels from their previous highs.

In the latest update from the Federal Open Market Committee (FOMC) meeting in June, there was a surprising shift in the dot plot projections, with a median forecast of one rate cut in 2024 instead of the expected two.

However, Chair Jerome Powell stressed during the press conference that this was a close decision and both options are still viable outcomes. The market’s expectation of a rate cut by September initially increased to 85% after a soft CPI report but later settled at 65% after the FOMC meeting.

During the press conference, Powell also highlighted key points. He mentioned that labor market conditions would need to deteriorate further than expected by the FOMC to support a rate cut, indicating a higher threshold following the FOMC’s revised unemployment projections.

Additionally, he reiterated the Fed’s minimal reliance on neutral rate estimates for policy decisions and announced plans for a review of the communication strategy towards the end of the year.


Goldman Sachs maintains its forecast of a rate cut in September followed by another in December. Their inflation prediction for 2024 is slightly below the FOMC’s, which Powell described as “fairly conservative.” Stronger inflation data in recent reports lead Goldman Sachs to believe that another rate cut in September is probable if future data remains consistent.