Synopsis:

Goldman Sachs expects the FOMC to cut rates by 25bp at this week's December meeting but revises its 2025 Fed outlook, removing the January rate cut while expecting a slightly higher terminal rate forecast of 3.5-3.75%.

Key Points:

• December Meeting Expectation: The FOMC is expected to reduce the fed funds rate target range by 25bp to 4.25-4.5%.
• Revised Fed Call for 2025: Goldman Sachs no longer expects a January rate cut, anticipating cuts only in March, June, and September, reflecting a slightly higher terminal rate of 3.5-3.75%.
• Labor Market Consideration: Persistent labor market uncertainty led to the revision, as Fed leadership may seek clearer stabilization before initiating further cuts early in 2025.

Conclusion:

The FOMC is likely to signal a more cautious approach to rate cuts in 2025. Goldman Sachs sees a deliberate pace of easing, with a March cut now expected to follow December's anticipated rate reduction.