Goldman pushes rate cuts to 2027 as jobs data keeps tightening

Goldman Sachs pushed its Federal Reserve rate-cut forecast to 2027, citing jobs data that refuse to soften. The revision is not subtle — it moves the timeline by two years. It also signals something broader: the labor market is rewriting monetary policy expectations in real time, and the revisions are no longer incremental.

The jobs numbers that prompted the shift are not dramatic in any one headline. They are persistent. Openings remain elevated, hires continue, and the quit rate has not collapsed. That combination keeps wage pressure alive and keeps the Fed's hands tied. GlobeSt noted that divisions inside the Fed are widening as strong employment clouds what had been a clearer path toward easing. The Bank of England is facing a similar bind, with policymaker Dave Taylor signaling rates will hold barring a worst-case scenario, according to Reuters.

The market reaction has been sharp where it matters most. South Korea's KOSPI fell nearly 9 percent as Fed fears hammered tech stocks, per Reuters. The sell-off reflects a recalibration: if the Fed cannot cut, the AI infrastructure build loses one of its key tailwinds — cheap capital. Meanwhile, the companies selling picks and shovels to the data center scramble, including Caterpillar and Hochtief, are still profiting, the Financial Times reported. They are less sensitive to rate expectations because their revenue is tied to construction timelines already locked in.

Outside the US and Europe, central banks are diverging. Vietnam's central bank vice governor told Reuters the country will lean toward fiscal policy to meet growth targets, effectively sidestepping the monetary tightening that dominates the developed world. India's rupee and bonds are rallying on capital inflows, supported by the Reserve Bank of India's moves to stabilize the currency. The pattern is clear: emerging markets are no longer waiting for the Fed to ease. They are managing their own cycles, and in some cases, moving faster.

The Goldman revision is not a forecast. It is a recognition. The labor market has not cracked, and until it does, the rate cycle will not turn. The question now is whether the data will cooperate by mid-decade, or whether the Fed will be forced to hold even longer while wage growth keeps inflation above target. The answer will be written in the quit rate, the openings-to-hires ratio, and the wage drift in sectors that are still hiring. Those numbers have not turned yet.