Goldman Sachs has revised its projection for Federal Reserve rate cuts, expecting changes to begin in September 2025. This decision is based on current trends in disinflation and labor market changes.
Goldman Sachs Forecast on Rate Cuts
Goldman Sachs anticipates three 25-basis-point rate cuts by the end of 2025, starting in September. This forecast deviates from expectations of other major financial institutions, such as Bank of America and Morgan Stanley. Economic shifts related to disinflation and labor changes are significant factors in this revision. As David Mericle stated, “The odds of a rate cut in September are 'somewhat above' 50%. We’re penciling in 25-basis-point cuts in September, October, and December, as well as cuts of the same magnitude in March and June 2026.
Impact of Changes on Markets
Lower interest rates typically lead to increased liquidity in both traditional and cryptocurrency markets. This creates a favorable environment for risk-on assets, potentially driving capital flows into sectors such as cryptocurrencies. Cryptocurrency markets may experience a bullish trend, influencing investments in Bitcoin, Ethereum, and DeFi tokens.
Potential Outcomes for Investors
Increased liquidity and lower rates may lead to higher trading volumes and liquidity shifts towards decentralized finance. Historical data shows that rate cuts often correlate with market volatility and rallies in cryptocurrency prices. This environment supports risk-on investments, enhancing capital influx.
Goldman Sachs' revised forecast for Fed rate cuts indicates significant shifts in economic policy that could impact both traditional and cryptocurrency markets. Investors should stay alert to potential fluctuations and opportunities in the markets.
