Goldman adds third Fed rate hike to forecast for March 2027

When a top-tier bank shifts to expecting three hikes in the current cycle, that tends to underpin the US dollar and short-dated Treasury yields while intensifying headwinds for rate-sensitive equities and gold. Moving the projected first cut to December 2027 lengthens the stretch of restrictive policy, a potential drag on long-duration assets. The drop of Goldman’s late-October forecast shows the growing influence of oil: the Middle East escalation the bank cited as a risk has now shown up directly in inflation. If crude climbs further — from strikes on Hormuz shipping and Saudi Arabia’s East-West pipeline, for instance — the odds would tilt toward a January hike rather than one in March.

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After three consecutive hot inflation reports, Goldman’s “maybe” on a March hike has become a “likely”.

In summary:

• Goldman continues to pencil in a 25bp Fed move in December and has layered on another 25bp hike for March 2027.
• The March increase could arrive in January, though March remains the more probable timing because November and December inflation prints are seen as milder.
• The first rate cut is now expected a quarter later than before, in December 2027.
• Most FOMC members are expected to use the December dot plot to flag a third hike.
• Goldman still believes inflation will be meaningfully lower by end-2027 once tariff, energy and AI-related price pressures ease.

David Mericle, the bank’s chief US economist, said in a note on Tuesday that Goldman now expects the Federal Reserve to lift rates once more in March 2027. That would follow a quarter-point move in December and comes after inflation ran above expectations for a third straight month.

The Fed’s December 8-9 meeting is still expected to produce a 25 basis point rate rise, the second of the current tightening cycle, according to Goldman. Adding the March hike would make it the third. Mericle noted the timing could be pulled up to January, though March remains a bit more probable. November and December inflation are seen as fairly tame, whereas bigger price gains at the start of the year are apt to boost January’s figures. The lender has also moved the expected first cut back by a quarter, to December 2027.

The revision comes after the October consumer price report came in stronger than anticipated. Goldman thinks the streak of solid inflation readings will push most Fed officials to show a third hike on the December dot plot, and a hot January CPI report would make that increase the path of least resistance. Still, the bank is confident that inflation will be meaningfully lower by the end of 2027 once tariff, energy and AI-related price pressures fade.

That marks a reversal of Goldman’s stance from a few weeks earlier. In late October, the bank took the March hike out of its base-case forecast. It cautioned then that a Middle East escalation lifting oil prices, together with stubborn inflation, could alter the Fed’s course. Its asset-management division has also said that firmer inflation might require a more aggressive tightening campaign lasting into 2027.

Goldman’s updated outlook largely matches what Fed officials have said this week. Philadelphia Fed President Anna Paulson said further gradual hikes look appropriate, Chicago Fed President Austan Goolsbee described the latest CPI data as borderline disturbing, and Governor Christopher Waller had said a hot reading could lead him to back a bigger move. A quarter-point December hike is almost fully priced in by markets, with a smaller chance assigned to a half-point increase.

The federal funds target range now stands at 3.75% to 4%. December’s decision and its updated projections will show whether officials are ready to signal the additional tightening Goldman expects.