Goldman and BofA now see no Fed cut before mid-2027
Mortgage professionals bracing for Federal Reserve rate cuts may need to recalibrate their timelines as some of the largest banks on Wall Street have revised their interest-rate forecasts.
Goldman Sachs and Bank of America are now among a growing cohort of major financial institutions calling for the Fed to hold rates steady through the end of this year and potentially well beyond.
The recalibration follows an April jobs report that showed US employers added more positions than expected for a second consecutive month, reinforcing the resilience of the labor market and complicating the case for rate cuts.
"The data simply don't warrant cuts this year," wrote Aditya Bhave, head of US economics at Bank of America, in a note to clients on May 8.
"Core inflation is too high, and moving up. The solid April jobs report was the last straw, especially given hawkish Fedspeak."
Bhave and his colleagues now forecast no Fed rate reduction until July 2027, a revision from their previous call of September 2025.
Goldman Sachs economists, led by Jan Hatzius, pushed back their own forecast for the Fed's next move to December 2026, a delay from September of this year.
The firm simultaneously lowered its estimate for the probability of a US recession over the next 12 months, suggesting the repricing reflects economic durability rather than distress.
Read more: As global recession odds surge, here’s what’s at stake for the US housing market
The prospect of elevated borrowing costs persisting through 2026 and into 2027 narrows the window for a sustained refinance surge and may continue to pressure affordability for prospective buyers navigating a market already strained by limited inventory.
Not all of Wall Street agrees
Despite the broad shift in sentiment, some major institutions are holding their ground.
Citigroup economists Andrew Hollenhorst, Veronica Clark and Gisela Young maintained their view that the Fed will ease policy before the year is out. They argued that easing remains underpriced given what they characterize as lackluster hiring and wage growth in recent months.
Morgan Stanley and Barclays have both been forecasting an extended pause from the central bank, though they stop short of the more aggressive timelines now being floated by Goldman and BofA.
Read more: Fed's Powell suggests rate hikes unlikely in the short term
Inflation data adds another layer of pressure
Geopolitical tensions have added fuel to those concerns. The Iran conflict has jolted oil markets and introduced fresh inflationary pressures into the equation, with options traders increasingly pricing in the possibility that the Fed may not just hold, but could raise rates as early as 2027.
Two Federal Reserve officials dissented at the central bank's most recent policy meeting, arguing that the next move could in fact be a rate increase rather than a cut.
Minneapolis Fed president Neel Kashkari said that the resulting price shock could be large enough that the Fed would need “potentially a series” of rate hikes to keep inflation expectations anchored.
“We would likely have to follow through with a strong policy response … Federal funds rate increases, potentially a series of them, could be warranted even at the risk of further weakness to the labor market,” he said.
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