Goldman Sachs: The Federal Reserve may be more aggressive in cutting interest rates next year. In December 2025, Josh Schiffrin, Chief Strategist and Head of Financial Risk at Goldman Sachs' Global Banking and Markets Division, released a significant judgment: there is growing concern within the Federal Reserve about the sustainability of employment conditions, which means they may be more willing to lower interest rates further next year than the market previously assumed, and the threshold for taking additional rate-cutting action may be lower than the market's concerns before the meeting. Schiffrin pointed out that the next few employment reports will be key factors in determining whether the Federal Reserve will resume easing policies, but the market's focus needs to adjust - special attention should be paid to the unemployment rate, rather than the overall growth in non-farm employment numbers. Goldman Sachs' outlook for future monetary policy is bolder: the easing cycle will extend into 2026, and the federal funds target rate may drop to 3% or lower. The core logic supporting this judgment is that inflation will remain moderate while labor market slack will increase, which will provide operational space for the Federal Reserve to eliminate remaining policy constraints. The previous week, remarks by Federal Reserve Chairman Powell at a press conference were interpreted as signaling concerns about the sustainability of the labor market. Although the current basic situation for the Federal Reserve remains to keep interest rates unchanged and assess subsequent data, Goldman Sachs clearly believes that the winds are changing.
