Goldman Sachs: The Federal Reserve may cut interest rates more aggressively next year, and the total non-farm payroll will no longer be the leading indicator

Goldman Sachs expects the Federal Reserve to be more willing to cut interest rates further next year than the market had previously assumed. Josh Schiffrin, chief strategy officer and head of financial risk for Goldman Sachs' global banking and markets division, said last week's Powell press conference sent a signal of growing concerns within the Fed about the sustainability of employment conditions. While the Fed's base case remains to keep interest rates on hold and evaluate follow-up data, Schiffrin believes the threshold for additional rate-cutting action may be lower than the market's concerns before the meeting. Schiffrin said the next few jobs reports will be a key factor in determining whether the Fed resumes easing, and the market will pay particular attention to the unemployment rate rather than overall non-farm payrolls growth. Looking ahead, Goldman Sachs expects the easing cycle to extend into 2026, with the federal funds target rate likely to fall to 3% or lower. This outlook reflects its view that inflation will continue to be tame, while labor market slack increases, leaving room for the Federal Reserve to remove remaining policy constraints. (Golden Ten)