Goldman Sachs Predicts Three Fed Rate Cuts Amid Rising Inflation Concerns

Goldman Sachs has revised its U.S. inflation outlook, now projecting the core Personal Consumption Expenditures (PCE) index to reach 3.5% by the end of 2025, up from its earlier estimate of 3.0%. The adjustment comes amid persistent inflationary pressures and signals a shift in monetary policy expectations.

In response to the anticipated economic slowdown and potential strain on job growth, Goldman Sachs forecasts that the Federal Reserve will implement three interest rate cuts in the second half of 2025. This projection is more aggressive than both the Fed's own dot plot and current market expectations, which had priced in fewer cuts.

Fed officials, during their March meeting, indicated the possibility of rate reductions later this year, but their tone remained cautious. Analysts now await upcoming labor market data and a key speech by Fed Chair Jerome Powell for further insight into the central bank’s direction.

Historically, rate cuts have served as a bullish catalyst for risk assets, including cryptocurrencies. Lower interest rates reduce borrowing costs, increase liquidity, and often encourage investors to seek higher-yielding assets, such as Bitcoin and altcoins. As a result, market participants are closely watching for dovish signals that could spark renewed buying momentum in the crypto market.

This evolving macroeconomic backdrop underscores the interconnectedness of monetary policy, inflation, and digital asset performance. If the Fed aligns with Goldman’s forecast, the crypto market could see a surge in investment activity, especially from institutional players seeking returns in a lower-rate environment.

With inflation trends, Fed actions, and crypto market sentiment tightly intertwined, investors are bracing for a volatile but potentially opportunistic period in the second half of 2025. Stay tuned as Powell’s comments and economic data shape the next moves.