Wall Street Forecasts Fed Rate Cuts in 2027 as Tightening Cycle Nears End
Multiple Wall Street firms, including Pantheon Macroeconomics, Goldman Sachs, Morningstar, and Citi, forecast the Federal Reserve will end its current tightening cycle and begin cutting interest rates in 2027. Pantheon projects the federal funds rate will drop from 3.75%-4.00% to 3.125% by end of 2027, citing consumer fatigue and slowing job growth. However, Pantheon warns of a possible final 25-basis-point rate hike this year due to rising energy costs. Goldman Sachs expects the last hike in October, contingent on oil prices cooling. Morningstar forecasts two cuts in the second half of 2027, with further reductions in 2028. Citi predicts the Fed will hold rates steady in October and December, then resume cuts in June 2027.
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Fed's Williams Says Rate Hike This Year Reasonable; Wall Street Forecasts 2027 Cuts
New York Fed President John Williams stated that inflation needs to be brought back to target in a timely manner and that another rate hike by the end of this year is reasonable. Market pricing now implies a nearly 70% probability of a rate increase in October. U.S. stock futures fell and bond yields surged to multi-year highs on the hawkish comments. However, several major Wall Street banks are projecting rate cuts in 2027 and beyond. Goldman Sachs forecasts one more hike in October 2027, then stable rates until rate cuts begin in late 2027, bringing the federal funds rate to 3.25%-3.5%. Pantheon Macroeconomics expects the Fed to ease next year, cutting rates to 3.125% by end-2028. Morningstar's Preston Caldwell predicts two rate cuts in the second half of 2027 and four more in 2028, bringing the rate to 2.50%-2.75%. The article also notes that White House economic adviser Kevin Hassett criticized Fed officials for advocating further tightening, questioning the need for rate hikes given core inflation near 2%.
Read sourceWall Street Turns Dovish: Fed Expected to Cut Rates in 2027 After Tightening Cycle Ends
According to a report from cfi_forex citing multiple Wall Street forecasts, the Federal Reserve's tightening cycle may end this year, with a pivot to rate cuts expected in 2027. Pantheon Macroeconomics predicts the FOMC will adopt substantial easing, lowering the federal funds rate from 3.75%-4.00% to 3.125% by end of 2027, though it warns of a possible 25-basis-point hike this year due to rising energy costs. The firm attributes the expected dovish turn to consumer fatigue, noting that strong household spending was fueled by tax refunds and stock gains, but low-income households face growing financial pressure as support fades and Medicaid/SNAP eligibility tightens. Core PCE inflation is expected to remain stable through late 2026 before moving toward 2% in 2027. Goldman Sachs forecasts a final rate hike on October 27, ending the cycle, contingent on oil prices cooling. Morningstar expects two rate cuts in the second half of 2027, while Citigroup predicts the Fed will hold rates steady in October and December, resuming cuts in June 2027. The report also notes that historically, the average gap between the last rate hike and first cut is six months, and that Fed Chair Warsh, appointed by a rate-cut-advocating president, may facilitate consensus on easing.
Read sourceCiti Forecasts Fed to Hold Rates in Oct, Dec, Resume Cuts in June 2027
According to a report from Citi, the investment bank expects the Federal Reserve to maintain its current interest rate at both its October and December meetings. Citi analysts believe the Fed will hold rates steady in October to assess the impact of a previous 25-basis-point rate hike, and then again in December, as a series of moderate inflation data should provide sufficient evidence that price pressures are easing. Looking further ahead, Citi forecasts that as inflation continues to cool, the Fed will resume its rate-cutting cycle in June 2027. The forecast is attributed to Citi and is based on the expectation of sustained disinflationary trends.
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Wall Street Turns Dovish: Pantheon, Goldman, Citi See Fed Rate Cuts Starting in 2027
A growing number of Wall Street forecasters are predicting the Federal Reserve will end its current tightening cycle soon and begin cutting interest rates in 2027. Pantheon Macroeconomics projects the FOMC will lower the federal funds rate from 3.75%-4.00% to 3.125% by end of 2027, citing consumer fatigue as low-income households face financial pressure from expiring tax refunds and stricter Medicaid and SNAP eligibility. However, Pantheon warns that surging energy costs could still trigger one more 25-basis-point rate hike this year. Goldman Sachs expects the Fed to deliver its final hike in October 2025, ending the tightening cycle, contingent on oil prices continuing to fall. Morningstar forecasts two rate cuts in the second half of 2027, with further reductions bringing the rate to 2.50%-2.75% by end of 2028. Citi predicts the Fed will hold rates steady in October and December 2025, then begin cutting in June 2027 as inflation data softens. The article also notes that Fed Chair Warsh, appointed by a president favoring lower rates, and the fading of fiscal stimulus may facilitate a consensus for easing.
Read sourceMorningstar Forecasts Two Fed Rate Cuts in Second Half of 2027, Further Reductions in 2028
According to a report from CLS (Cailianshe) citing Morningstar, the investment research firm expects the Federal Reserve to implement two interest rate cuts in the second half of 2027. The forecast further anticipates additional rate reductions in 2028, which would bring the federal funds rate down to a range of 2.50% to 2.75% by the end of 2028. This long-term projection from Morningstar outlines a gradual easing cycle starting in late 2027, well beyond the current market focus on near-term Fed policy moves.
Read sourceWall Street Turns Dovish: Pantheon, Goldman, Citi Predict Fed Rate Cuts by 2027
A growing number of Wall Street analysts are forecasting that the Federal Reserve will end its current tightening cycle and begin cutting interest rates in 2027. Pantheon Macroeconomics predicts the Fed will cut the federal funds rate from 3.75%-4.00% to 3.125% by the end of 2027, citing consumer fatigue, slowing job growth, and easing inflation. However, Pantheon warns of a potential final 25-basis-point rate hike this year due to rising energy costs. Goldman Sachs expects the Fed's last hike in October 2027, contingent on oil prices falling to curb inflation. Morningstar forecasts two rate cuts in the second half of 2027, with further reductions in 2028. Citi predicts the Fed will hold rates steady in October and December, then resume cuts in June 2027 as inflation data softens. The forecasts are attributed to specific conditions including low-income household financial strain, the impact of AI on employment, and the political context of Fed Chair Warsh's appointment by a pro-rate-cut president.