Goldman Sachs now expects the Federal Reserve to raise interest rates again in March 2027, adding a third increase to a tightening cycle it had previously thought would end in December. The bank changed its forecast on Tuesday after October inflation came in hotter than expected for a third month in a row. Reuters reported the revised call on 11 November.

The bank still expects a quarter-point increase at the Federal Reserve's meeting on 8 and 9 December, which would be the second rise of the current cycle. The new March call would make it three. Goldman said the third move was more likely in March than in January, because it expects inflation figures for November and December to be relatively mild before price pressures pick up again early in the year.

First rate cut pushed back to December 2027

Goldman has also pushed back its forecast for the first interest rate cut by three months, to December 2027, followed by further cuts in March, June and September 2028. The shift underlines how far the outlook has moved in a matter of weeks: in late October the bank had removed a March increase from its base case altogether, arguing that the inflation trend would improve as tariff, energy and artificial intelligence related price pressures faded.

That judgement has now been overtaken by the data. October marked the third consecutive month in which inflation surprised forecasters on the upside, and Goldman expects the run of firm readings to lead most members of the Federal Open Market Committee to signal a third rise in the updated projections published alongside the December decision, known as the dot plot.

Fed officials sound more hawkish

The bank's revised outlook is broadly in line with the tone from Federal Reserve officials this week. Philadelphia Fed President Anna Paulson said further gradual increases seemed appropriate, Chicago Fed President Austan Goolsbee called the latest consumer price report borderline disturbing, and Governor Christopher Waller had said a hot reading could lead him to back a larger move. InvestingLive reported that markets are pricing a quarter-point December increase as close to certain, with only a small chance of a half-point move.

Goldman is the first of its peers to change its forecast since the October data, and it joins Deutsche Bank, which expects an additional quarter-point rise in January on top of increases in December and March. The bank said the March move could be brought forward to January if inflation stayed hot, but March remained slightly more likely. With the federal funds target range currently at 3.75% to 4%, the December meeting and its updated projections will show whether policymakers are ready to signal the further tightening Goldman now expects.

Inflation still expected to ease by late 2027

Despite the gloomier near-term picture, Goldman has not abandoned its view that inflation will fall meaningfully by the end of 2027 as the effects of tariffs, the energy shock and AI-related price pressures fade. The bank's caution is that the path there may now run through one more increase than investors had assumed only a few weeks ago, keeping borrowing costs higher for longer and adding pressure on rate-sensitive shares and gold.