Goldman Sachs Expects a 25 Basis Point Rate Cut in September

Prior to releasing this report, data published on Tuesday showed that the U.S. Consumer Price Index (CPI) rose modestly in July, with a month-on-month increase of 0.3% in June and just 0.2% in July, in line with economists' expectations.

Breaking down the data, U.S. gasoline prices fell by 2.2% month-on-month in July. Food prices, after rising by 0.3% month-on-month for two consecutive months, stalled in July, remaining flat compared to the previous month.

Against this backdrop, Goldman Sachs expects the Federal Reserve to cut interest rates three times this year—in September, October, and December—by 25 basis points each time.

As early as a week ago, following the release of weak U.S. nonfarm payroll data—particularly the significant downward revisions to employment growth figures for the previous two months—Goldman Sachs noted that the recent revisions to employment reports were the most substantial adjustments in the past 57 years outside of recession periods. This implies that monthly job growth estimates over the past year may be reduced by 45,000 to 80,000.

At the time, Goldman Sachs stated that against the backdrop of a weak labor market, a September rate cut was already highly likely, and the focus of discussion should be whether the cut would be 25 or 50 basis points.

Following the release of July’s CPI data on Tuesday, Goldman Sachs argued that the figures suggest recent tariff-related price pressures will largely be temporary, as these measures have not yet led to a significant rise in consumer prices. The firm believes this CPI report reinforces the case for a "precautionary" 25 basis point rate cut in September to shield the economy from downside risks.

Goldman Sachs expects market attention to shift toward U.S. employment data in the coming months, as weak labor market figures could further strengthen the Fed's rationale for easing monetary policy.