Two of Wall Street's largest investment banks, Goldman Sachs and Morgan Stanley, have revised their forecasts for when the U.S. Federal Reserve will begin cutting interest rates, citing heightened inflation risks stemming from geopolitical conflict and rising oil prices.
Goldman Sachs now expects the first 25-basis-point rate cut in September 2026, a delay from its previous forecast of June. The bank anticipates a second cut in December of the same year. The revision is driven by concerns that the ongoing conflict between the U.S. and Iran could disrupt global oil supplies, pushing energy prices higher and sustaining inflationary pressures. Goldman raised its inflation expectations, projecting headline PCE inflation to reach 2.9% by the end of 2026, an upward revision of 0.8 percentage points. The bank also noted that Brent crude oil could average around $98 per barrel in March and April, roughly 40% above the 2025 average.
Similarly, Morgan Stanley economists maintain a base forecast of a 25 basis point cut in June and September, but acknowledged the risk of delays. Chief economist Michael Gapen and his team stated that the first cut could be pushed to September or December, with the second potentially deferred to 2027, if strong inflation and low unemployment persist.
The analysts highlighted that a 10% increase in oil prices could push headline inflation up by about 0.2 percentage points. Traders currently assign only a 41% probability to a September rate cut, reflecting market uncertainty.
For the cryptocurrency market, a "higher-for-longer" interest rate environment poses a headwind. Tighter monetary policy and reduced liquidity typically weigh on risk-sensitive assets like Bitcoin and Ethereum. Goldman Sachs pointed out that digital assets tend to perform best when financial conditions are loosening, and a delayed easing cycle could pressure the broader crypto market. Short-term volatility is expected to remain elevated as the market watches inflation data, energy prices, and signals from the Federal Reserve.
