Goldman Sachs says Fed more willing to cut rates again next year, citing job market risk

Goldman Sachs projects that the Federal Reserve may be more open to interest rate cuts next year, driven by a cautious tone from Chairman Jerome Powell regarding labor market risks. The report highlights Powell's acknowledgment of a gradually cooling labor market, while cautioning that recent employment data might be overstating actual job growth. Goldman suggests that upcoming labor market data will be crucial for shaping future policy expectations, focusing particularly on the unemployment rate. The bank anticipates that the easing cycle may extend into 2026, with potential cuts in the fed funds target rate to 3% or lower, depending on inflation moderation and labor market conditions. In this context, the U.S. dollar may face a softer medium-term outlook, especially if labor data supports the Fed's expanding concerns.