#tradersbetonthreemorefedhikes How much longer will interest rates stay high???
U.S. inflation is heating up again, putting the prospect of further Fed rate hikes back in the spotlight. For markets, the next hike is only part of the story. The bigger question is how long rates will stay elevated—and how long businesses and households will have to shoulder high borrowing costs.
In its latest macro research briefing, Goldman Sachs projects one more Fed rate hike in December, followed by a rate-cutting cycle beginning in September 2027, with long-term interest rates declining over the coming months. Under that scenario, Goldman estimates that higher rates will shave roughly 0.2 percentage points off U.S. GDP growth in 2027. If rates remain at current levels, the drag would be more than twice as large.
Goldman’s relatively modest estimate of the growth impact therefore hinges on rates subsequently falling. If inflation proves persistent and long-term borrowing costs remain elevated, markets will need to reassess not just how much further the Fed might hike, but how long the U.S. economy can withstand the pressure.
U.S. inflation is heating up again, putting the prospect of further Fed rate hikes back in the spotlight. For markets, the next hike is only part of the story. The bigger question is how long rates will stay elevated—and how long businesses and households will have to shoulder high borrowing costs.
In its latest macro research briefing, Goldman Sachs projects one more Fed rate hike in December, followed by a rate-cutting cycle beginning in September 2027, with long-term interest rates declining over the coming months. Under that scenario, Goldman estimates that higher rates will shave roughly 0.2 percentage points off U.S. GDP growth in 2027. If rates remain at current levels, the drag would be more than twice as large.
Goldman’s relatively modest estimate of the growth impact therefore hinges on rates subsequently falling. If inflation proves persistent and long-term borrowing costs remain elevated, markets will need to reassess not just how much further the Fed might hike, but how long the U.S. economy can withstand the pressure.