Goldman Sachs no longer expects a Federal Reserve rate cut before December 2027, three months later than its previous call, after adding a third quarter-point hike in March 2027. For households and investors, the message is that relief from elevated borrowing costs is now more than a year away.
The call from chief US economist David Mericle reverses the bank's late-October stance, when Goldman had removed a March hike from its base case. The bank still expects inflation to be meaningfully lower by the end of 2027 as tariff, energy and AI-related price pressures fade.
Goldman still expects a quarter-point hike at the Dec. 8-9 meeting. The new path would lift the federal funds rate to a peak of 4.25% to 4.5%, from 3.75% to 4% today, a range the Fed reached in September with its first hike in three years.
October's 0.4% inflation jump was the third straight upside surprise, and core prices rose 0.3%.
Borrowing costs repriced the same day
The 10-year traded back above 5% before easing to 4.992%, and the 30-year reached 5.352%. The 2-year, the maturity most tied to Fed expectations, surged more than 18 basis points to 4.736%. One basis point is 0.01 percentage point. A mediocre $42B auction of Treasury notes compounded the selling.
The Treasury Curve Sits Above 4.7% at Every Maturity
US Treasury yields by maturity, %, as of Nov. 10, 2026
Bar chart. Yield, %. 2-Year: Yield (%) 4.74%. 10-Year: Yield (%) 4.99%. 30-Year: Yield (%) 5.35%.
Source: CNBC
Because the 10-year is the benchmark for mortgages, car loans and credit card rates, households felt the move quickly: the 30-year mortgage rate climbed from 7.18% to 7.3% after the report, according to Mortgage News Daily.
Housing costs were already the pressure point: mortgage rates sat above 7% before the report, and household debt rose $334B in the third quarter to $19.1T.
Why March beats January
Mericle expects November and December inflation readings to come in softer before companies push through start-of-year price increases, which makes a March move slightly more likely than January.
A firm January report, published before the March meeting, would make the hike the path of least resistance.
Goldman puts 50% odds on that baseline, 35% on four hikes and a higher end point, and 15% on a recession.
The size of December's move is the live debate. Fed Governor Christopher Waller said before the report that a half-point hike should be considered if inflation ran hot.
CME FedWatch put the odds of a quarter-point December hike at 90.5% as of Nov. 10.
Anyone carrying a mortgage, a car loan, or a credit card balance faces a longer wait for relief. The discount rate applied to future profits stays higher too, which is why a 10-year yield at 5% matters well beyond the bond market.
