Goldman Sachs: The Federal Reserve may be more proactive in its stance on interest rate cuts next year.

Josh Schiffrin, Chief Strategist and Head of Financial Risk at Goldman Sachs' Global Banking and Markets division, stated that following last week's Federal Reserve rate cut and Chairman Jerome Powell's cautious comments on labor market risks, the Fed's willingness to accept further rate cuts next year may exceed previous market expectations. Schiffrin pointed out that Powell's remarks indicate growing concerns within the Fed about the sustainability of the employment situation. While acknowledging the continued gradual cooling of the labor market, Powell also warned that recent employment data may have exaggerated potential job growth and emphasized significant downside risks to the labor market. Goldman Sachs analysts believe this shift in focus makes upcoming labor market data crucial in shaping policy expectations, with particular attention needed on the unemployment rate rather than overall non-farm payroll growth. Goldman Sachs expects this rate-cutting cycle to continue until 2026, with the federal funds target rate potentially falling to 3% or lower.