By admin1
Goldman Sachs pushed its next expected Fed rate cuts into 2027, while J.P. Morgan expects the central bank to stay on hold this year.
Homebuyers hoping for lower borrowing costs may have to keep waiting until next year.
Goldman Sachs Research this week pushed its forecast for the Federal Reserve’s next rate cuts into 2027, a more cautious outlook that lands as the housing market remains highly sensitive to even small swings in mortgage rates.
Goldman’s Chief U.S. Economist David Mericle now expects the Fed to cut rates in June and December 2027, delaying what had previously been a forecast for cuts in December 2026 and March 2027. Separately, J.P. Morgan Wealth Management strategists also expect the central bank to hold rates steady through the end of this year, with inflation still running above target and energy prices adding uncertainty.
For housing, the forecasts point to a familiar problem where buyers, sellers and agents may be waiting longer than expected for monetary policy to deliver meaningful affordability relief via lower borrowing costs.
While the Fed does not directly set mortgage rates — which more closely track investor expectations and longer-term bond yields — expectations for Fed policy influence the broader rate environment, and the central bank’s higher-for-longer stance has helped keep borrowing costs elevated for homebuyers after one of the least affordable stretches in recent housing-market history.
A fragile housing rebound
The latest forecasts come after recent housing data showed how much buyer demand still depends on mortgage-rate movement.
Existing-home sales rose 3.2 percent in May to a seasonally adjusted annual rate of 4.17 million, the highest level since December, according to the National Association of Realtors’ latest numbers. Inventory also climbed, giving buyers more options as some households moved forward after mortgage rates eased earlier in the spring.
But a separate look at pending contracts pointed to a more fragile recovery. Closed sales in May reflected decisions buyers made weeks earlier, when rates had briefly moved lower. Pending sales, which offer a more current look at buyer activity, were nearly flat as mortgage rates moved higher again.
Goldman’s Mericle wrote that recent U.S. economic activity and labor-market data have been stronger than expected, with job growth picking up in recent months. Goldman now expects the unemployment rate, which stood at 4.3 percent in May, to rise only slightly further this year to 4.4 percent, down from its previous forecast of 4.6 percent.
“This rise in unemployment would not be enough to create a sense of urgency to lower the funds rate,” Mericle wrote.
Goldman also expects inflation to remain above the Fed’s 2 percent target this year. The firm said tariff effects should begin to fade soon, but higher oil prices, the war in the Middle East and artificial-intelligence-related demand are expected to keep year-over-year core personal consumption expenditures inflation above 3 percent throughout 2026.
The Fed may stay on hold through 2026
J.P. Morgan’s outlook is similar in the near term. In a recent note about Kevin Warsh’s first Federal Reserve meeting as chair, J.P. Morgan Wealth Management said its strategists expect the Fed to keep interest rates steady through year-end. The federal funds rate has remained in a range of 3.5 percent to 3.75 percent since December 2025.
“The Federal Reserve is not expected to move rates in the June meeting, and we believe they will be on hold for the rest of 2026,” J.P. Morgan Wealth Management Chief Investment Strategist Phil Camporeale said in the note.
Rate hikes are not the base case for either Goldman or J.P. Morgan, but both institutions acknowledged that policymakers have become more cautious as inflation remains elevated. Goldman said hikes are unlikely but somewhat more likely than before, noting that stronger economic and labor-market data could make additional tightening less risky if inflation worsens.
“A stronger starting point for the economy reduces the risk that a hike could end up looking like a costly mistake,” Mericle wrote.
J.P. Morgan likewise said a move in either direction is not completely off the table, though its base case remains for the Fed to hold rates steady through year-end. But for the housing market, the message is pretty straightforward — a sales rebound built on lower borrowing costs may be difficult to sustain if rates remain elevated.
