Goldman Sachs Group Inc (NYSE:GS, ETR:GOS) said the Federal Reserve’s September meeting minutes strengthen the case for additional rate cuts this year, noting that “most participants judged it would likely be appropriate to ease policy further over the remainder of the year.”
The firm said this aligns with its forecast for another cut in December.
While “almost all” officials backed September’s 25 basis point reduction, Goldman highlighted lingering divisions.
“Some participants noted that relatively easy financial conditions warranted a cautious approach,” while “a few participants saw merit in keeping the federal funds rate unchanged,” the analysts highlighted.
One member, Governor Miran, favored a deeper 50 basis point cut, evidence of “growing concern about softening economic momentum,” according to the analysts.
Goldman said the Fed’s tone on employment was “notably softer,” as “a few participants” pointed to data showing the labor market “had been softening for longer than was previously reported.”
The minutes also “stressed that downside risks to employment had increased,” particularly for younger and Black workers.
At the same time, “a majority of participants saw risks to inflation as skewed to the upside,” but “some” noted that pressures had eased since earlier in the year.
A couple of officials said inflation would already be near 2% excluding tariff effects.
Goldman also noted the Fed’s discussion on balance sheet normalization, citing comments that “reserves would be close to the $2.8 trillion range by the end of the first quarter of next year,” near the Fed’s estimated “ample” level.
The analysts wrote that this supports their expectation that runoff will stop at the end of first quarter of 2026.