---
title: "Goldman Sachs Research says Fed to hold rates in the United States through 2026; Inflation softer supports longer hold through 2026"
sdDatePublished: "2026-08-07T11:29:00Z"
source: "https://www.goldmansachs.com/pdfs/insights/briefings/the-outlook-for-the-fed/document.pdf"
topics:
  - name: "central bank"
    identifier: "medtop:20000350"
  - name: "monetary policy"
    identifier: "medtop:20000379"
  - name: "inflation"
    identifier: "medtop:20000370"
  - name: "stocks and securities"
    identifier: "medtop:20000396"
  - name: "business financing"
    identifier: "medtop:20000183"
  - name: "merger or acquisition"
    identifier: "medtop:20000204"
  - name: "precious material"
    identifier: "medtop:20000318"
  - name: "financial service"
    identifier: "medtop:20001370"
locations:
  - "Iran"
  - "China"
  - "United States"
---


Goldman Sachs Research says Fed to hold rates in the United States through 2026; Inflation softer supports longer hold through 2026

The Outlook for the Fed

The key insights today:
▪Bond markets interpreted Wednesday’s Fed meeting as dovish, but Goldman
Sachs Research expects the central bank to keep rates steady
throughout 2026.
▪Goldman Sachs Research suggests five ways to protect portfolios amid an
investment boom and rising inflation volatility.
▪Demand for critical minerals and rare earths is driving M&A and capital
raising activity.
▪Robust corporate earnings and signs of a resilient US economy suggest the US
stock rally could have room to run, according to Goldman Sachs Wealth
Management's Investment Strategy Group.
▪Briefings Brainteaser: What percentage of capital spending by the biggest US
tech companies is expected to be funded by debt this year?
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Why Goldman Sachs Research Expects the Fed to
Remain on Hold in 2026
Ahead of this week’s Federal Open Market Committee (FOMC) meeting, markets
were signaling the most uncertainty in three decades about whether
policymakers would hike, according to David Mericle, chief US economist in
Goldman Sachs Research.
In the end, the meeting was “somewhat anticlimactic,” Mericle writes in a report.
The FOMC held rates steady but issued no guidance on the future direction of
rates and no details on the committee’s interpretation of the impact of inflation.
“We had expected that most FOMC voters would not want to hike because the
June inflation data showed substantial improvement relative to prior months,”
Mericle writes.
Kevin Warsh, who became chairman of the Federal Reserve in May, made several
comments in his press conference after the FOMC meeting that Goldman Sachs
Research interpreted as dovish, Mericle writes.
Warsh appeared to downplay artificial intelligence-related price pressures and
seemed to suggest that they are isolated from broader pricing trends. Asked if
the rise in real, inflation-adjusted interest rates was a signal that the market
thought the Fed should hike, he connected it instead to the recent strength of
the economy.
Warsh also hinted that the rise in market interest rates could substitute for a rate
hike, though without saying so explicitly. Finally, asked if the Fed needed to raise
interest rates to lower inflation, he suggested that more credibly committing to
the inflation target could help to lower inflation by bringing down
inflation expectations.
“This contrasts with our reading of the evidence from economic research, which
suggests that it is difficult for the Fed to influence inflation through the
expectations channel” because most businesses and consumers are less attuned
to central banks, Mericle writes.

The bond market also interpreted the FOMC meeting as dovish, Mericle writes.
Near-term interest rates were lower on Wednesday, despite an increase in energy
prices, while long-term interest rates rose during the meeting.
The bond market is now pricing a 55% chance that the Fed hikes rates in
September (as of July 29). In contrast, Goldman Sachs Research expects the Fed
to keep rates steady. Mericle says he continues to expect that softer core
inflation in coming months will keep the Fed on hold for the remainder of 2026.
Read the full report for Mericle’s recap of this week’s FOMC meeting and its implications
for future rate decisions.
Balancing the Risks to Portfolios from an Innovation
Boom and Inflation
Investment portfolios face two key challenges. With the boom in capital
expenditure on AI, there is a growing risk that tech stock profitability slips before
the benefits of the new technology start to kick in. Exposure to the equity market
and tech stocks has increased in many portfolios, including the benchmark World
Portfolio that often guides asset allocation.
At the same time, inflation volatility and fiscal risks have risen, meaning bonds
may provide less of a buffer for investors, says Christian Mueller-Glissmann, head
of Asset Allocation in Goldman Sachs Research.
And while portfolio rebalancing is important, it can be costly to miss out on an
ongoing rally. “When you are in these periods of incredibly strong equity returns,
and when you're in these periods of tech leadership, it can be quite costly to lean
against the momentum, especially if you're too early,” Mueller-Glissmann says.
With those factors in mind, Goldman Sachs Research suggests five strategies for
balancing portfolios:
Real assets (infrastructure, prime real estate, energy, or gold) help balance
multi-asset portfolios against inflation risks, provide valuable diversification, and
increase the potential for real, inflation-adjusted returns.
Diversifying across investment styles within equities can help manage the risks
linked to tech-stock momentum. Low volatility, high-dividend-yield stocks have
outperformed during declines in the technology sector.
Investors may benefit from regional diversification and by managing risks linked
to the US dollar and the dominance of US assets.
Goldman Sachs Research finds that long-dated call options, which give investors
the right to buy an asset at a certain price over a longer time period, were an
effective risk-management strategy during the dotcom bubble.
Alternative assets, including private markets and hedge funds, can also improve
risk-adjusted returns in later phases of a boom.
Read the full article or find more of our insights on financial markets
and macroeconomics.
The Mine-to-Magnet Strategy Is Spurring M&A in
Rare Earths
The growth of electric vehicles, AI, and alternative energy is fueling a surge of
dealmaking in critical minerals and rare earths, say Andrew Timbers and Nicholas
Smith, co-heads of metals and mining in the Americas at Goldman Sachs Global
Banking & Markets.
The properties of copper, lithium, and elements used in defense such as tungsten
and antimony are critical to the functioning of these rapidly growing
technologies. So, too, are rare earth elements. As demand accelerates, so is
financial activity—including M&A, IPOs, and US government investment aimed at
closing the gap with China.
“Critical minerals now sit at the intersection of electrification, AI-driven power
demand, and supply-chain security,” says Timbers.
Copper is a priority: a single gigawatt-scale data center can require up to 50,000
metric tons of the metal, and because new mines take 15 years or more to
develop, mining majors are racing to acquire smaller operators, says Timbers.
Meanwhile, rare earths companies are pursuing “mine-to-magnet” strategies—
vertically integrating from extraction through to magnet manufacturing—to
capture higher margins and reduce dependence on concentrated supply chains.
Financing these deals involves creative structures combining equity, government-
backed low-cost debt, and strategic offtake agreements, which are pre-
arranged contracts. Federal agencies have evolved from policymakers into
capital partners, taking equity stakes and providing hybrid funding to de-risk
projects, Timbers and Smith say.

Institutional investors, meanwhile, are building dedicated teams of analysts for
critical minerals and rare earths.
“There is a concentrated focus on unlocking tremendous value from these
investments,” says Smith.
Read the full article or find more of our insights on AI.
Is the US Stock Rally Over? 
Sharmin Mossavar-Rahmani (left) and Matthew Weir with moderator Nicola Gifford (right)
After a strong first half of the year for US stocks, Goldman Sachs Wealth
Management's Investment Strategy Group (ISG) recommends that investors stay
invested in US equities given strong company earnings and signs of a resilient
US economy.
Despite oil price shocks driven by the conflict with Iran, ISG expects US real
GDP to grow 2.2% in 2026—only a tenth of a percentage point below its
forecast at the beginning of the year. As the US becomes more energy
independent—with declining per-capita oil use and a growing share
of global oil and natural gas production—its households and corporations
are better equipped to weather energy price shocks, says Sharmin Mossavar-
Rahmani, chief investment officer for Wealth Management and head of ISG,
in ISG’s Mid-Year 2026 Outlook video. 
Corporate earnings have also remained strong. At the beginning of the
year, ISG expected S&P 500 company earnings to grow 9%-11% in 2026, but
it has now revised its forecast up to 16%-18% following stronger-than-
expected first-quarter earnings. Even excluding “Magnificent Seven” and
technology companies, S&P 500 earnings growth stood at 10.2% in the first
quarter of 2026. “That’s pretty significant when you think trend earnings
growth in the United States since World War II has been around 6.5%,”
says Mossavar-Rahmani. 
 
Watch ISG’s full video—Live Insights: Addressing Client Questions on the Mid-Year
2026 Outlook.
Briefings Brainteaser: Borrowed Bytes
Hyperscale US tech companies are expected to spend several trillion dollars on
capex in the coming years. What percentage of that investment is estimated by
Goldman Sachs Research to be funded by debt in 2026?
A) 33%
B) 50%
C) 66%
D) 72%
Check the answer here.
Goldman Sachs in the News
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