Synopsis:

Goldman Sachs expects the Fed to maintain its current policy stance at today’s June FOMC meeting, emphasizing high uncertainty and balanced risks. While inflation and growth projections may be adjusted slightly, the Fed is likely to signal no imminent move, with rate cuts deferred until December as tariff effects play out.

Key Points:

No Policy Change Expected:

• The Fed is expected to stay on hold, reiterating that uncertainty remains elevated and risks are two-sided.

• Chair Powell will likely downplay the significance of projections, stressing they remain highly contingent.

SEP Forecast Adjustments:

• 2025 inflation median likely nudged up to 3.0%

• GDP growth revised down to 1.5%

• Unemployment forecast up to 4.5%

Dot Plot Outlook:

• 2025: Two cuts to 3.875%, though Goldman expects a close 10–9 split among participants

• 2026: Two additional cuts to 3.375%

• 2027: One cut to 3.125%

• Long-run neutral rate unchanged at 3.0%

Tariff Assumptions and Timing:

• While tariff assumptions have risen, the recent de-escalation and soft inflation reports should temper forecast revisions.

• Goldman sees first rate cut in December, followed by two more in 2026.

• Peak summer tariff effects on inflation will still be too fresh for a cut earlier in the year.

Conclusion:

Goldman expects the June FOMC to hold rates steady and project a cautious, gradual easing path, beginning in December. While SEP adjustments may suggest modest deterioration in the 2025 outlook, the Fed will avoid bold moves and emphasize ongoing uncertainty. USD impact likely muted unless Powell signals less caution than expected.