Goldman Sachs Group Inc (NYSE:GS, ETR:GOS) expects the Federal Reserve will reduce interest rates by 25 basis points at its upcoming FOMC meeting on October 28 to 29, pointing to signs the US labor market is easing from its post-pandemic tightness.
Markets are pricing in a 99.9% chance the Fed will cut rates by 25 basis points, according to the CME Fed Watch Tool.
Goldman’s analysts also expect a further rate cut in December, with additional reductions projected in 2026.
They highlighted that alternative labor market measures indicate job growth rebounded from very low levels while job openings continued to decline.
“Overall labor market tightness also fell further and is now noticeably below its pre-pandemic level,” the analysts wrote.
They believe that the growth impulse from financial conditions and economic policy, which bottomed in the third quarter of 2025, is expected to rebound in the coming quarters as fiscal support begins to take effect.
Goldman Sachs said its probability-weighted forecast remains slightly more dovish than current market pricing.
Under the baseline scenario outlined by Goldman Sachs, the Fed’s terminal rate would be roughly 3% to 3.25%, with quarterly cuts projected in March and June 2026 following the October and December 2025 reductions.
The analysts highlighted that their projections incorporate a range of labor market indicators, including job openings data from JOLTS, Indeed, and LinkUp, as well as hiring plans, household expectations, and layoffs across multiple sectors.