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Strong U.S. Jobs Report Sends Fed Cut Call to 2027 and Raises Market Rate Odds

Markets and forecasters have pushed expected Fed rate cuts into 2027 because Middle East energy-driven inflationary pressure and stronger U.S. payrolls reduce the near-term case for easing.

The Federal Reserve Bank of New York building is seen in the Manhattan borough of New York, U.S., December 16, 2017. REUTERS/Eduardo Munoz/File Photo
Commuters queue for buses during peak hour outside Wynyard Station in Sydney, Australia, March 25, 2026. REUTERS/Hollie Adams/File Photo
Australia’s consumer confidence has fallen. NewsWire Nicholas Eagar

Overview

  • Goldman Sachs revised its outlook after Friday’s May payrolls, saying the Fed will likely keep rates unchanged through 2026 and delay cuts until 2027 because activity and job growth remain stronger than expected.
  • The U.S. jobs report showed employers added 172,000 positions in May with unemployment steady at 4.3 percent, a reading that reduces urgency for near-term easing by the central bank.
  • The New York Fed’s May Survey of Consumer Expectations found one-year inflation expectations little changed at 3.5 percent while household worries about current finances and job security jumped to multi-year highs.
  • Markets repriced quickly with tools such as the CME FedWatch showing sharply higher odds of further Fed action this year, reflecting a tilt toward policy staying restrictive longer.
  • In Australia, major banks now expect the RBA to hold the cash rate at 4.35 percent through 2026 while some lenders cut fixed mortgage rates and consumer sentiment hit decades-weak readings, leaving policy makers to weigh weaker demand against still-elevated inflation.