According to Woofun AI, the Goldman Sachs (GS.US) macro research brief established the baseline scenario for the Federal Reserve's policy path: it is expected that the last rate hike will be implemented in December, followed by a cycle of interest rate cuts starting in September 2027, and three interest rate cuts will be implemented. The setting of this schedule directly points to the long-term depressing effect of the high interest rate environment on the real economy, rather than simply a short-term policy shift.
The structural stickiness of inflation data forms the microscopic basis of the current policy impasse. According to the September US Consumer Price Index (CPI) data released on October 14, overall inflation rose 0.6% month-on-month and remained at 3.7% year-on-year. Deeply dismantling this growth structure, the energy sector contributed more than half of the monthly increase. Among them, gasoline prices surged 9.1% month-on-month, becoming the core driving force driving the overall CPI to 0.6% from 0.4% in August.
However, it would be biased to attribute inflation only to energy fluctuations. Excluding food and energy, the core CPI rose 0.3% month-on-month, the same level as August, indicating that the underlying price pressure has not abated substantially. More notable is the trend in housing prices, which further climbed to 0.4% month-on-month from 0.3% in August.
The stubborn performance of this core indicator makes it difficult for the market to use a single fluctuation in energy prices to explain the full picture of current inflation. For the Federal Reserve, the key variable is the sustainability of price increases: although energy prices can quickly drive up overall inflation, their subsequent impact depends on the cost transmission mechanism; and whether core inflation can slow down steadily determines policymakers' judgment on underlying price pressure. The current data is insufficient to confirm that inflation has begun a continuous downward channel, and core inflation lacks evidence of further cooling, providing logical support for continued austerity.
According to data compiled by Woofun AI, Goldman Sachs (GS.US) growth cost estimates are highly dependent on hypothetical differences in interest rate paths. Under the baseline scenario, which is a combination of the Federal Reserve's interest rate hike once in December, long-term interest rates falling from current levels in the next few months, and starting interest rate cuts in late 2027, Goldman Sachs (GS.US) estimates that higher interest rates will drag down the US GDP growth by about 0.2 percentage points in 2027.
This value is not a prediction of the US GDP growth rate, nor does it mean that the total economy will decline by 0.2%; it is a loss in marginal growth estimated by the model. However, if interest rates remain at current levels and do not fall back, this drag will expand to more than double the baseline estimate, or more than 0.4 percentage points. The huge gap between the two scenarios reveals the report's core judgment: future growth pressure depends not only on the actions of the Federal Reserve's short-term policy interest rate, but also on whether market financing costs can fall as a result. The Federal Reserve directly controls short-term capital prices, but the capital costs of housing loans, long-term corporate financing, and investment projects are greatly affected by long-term market interest rates. Therefore, even if the Federal Reserve stops raising interest rates, if long-term interest rates continue to be high, businesses and residents will not be able to immediately relieve falling financing costs, and housing demand, corporate investment, and credit activities will continue to be under pressure. Compared to the impact of a single rate hike, the persistence of high financing costs may have a greater cumulative negative impact.
The final direction of the policy path depends on whether the dual conditions of easing core inflation and falling long-term interest rates are fulfilled. Goldman Sachs (GS.US) expects to cut interest rates is based on the premise that core inflation will continue to ease; if price increases continue to fall, or energy costs are further transmitted to other goods and services, the period of maintaining austerity may be extended, and interest rate cut expectations will also face a re-evaluation.
Meanwhile, a fall in long-term interest rates from current levels is a key assumption in Goldman Sachs (GS.US)'s moderate growth drag down estimates. If long-term interest rates remain high, financing costs may continue to suppress demand even if policy interest rates do not rise continuously. From the perspective of asset pricing, investors need to distinguish between policy shifts and improvements in the financing environment: stopping interest rate hikes can ease concerns about further austerity, but whether growth pressure can be reduced still depends on whether actual borrowing costs fall. Key variables for follow-up observations have been clearly defined: whether core inflation continues to slow, long-term interest rates fall back, and whether housing, investment, and employment are beginning to show more obvious pressure. If inflationary stickiness forces financing costs to remain high for a longer period of time, the cost to the US economy will be significantly higher than 0.2 percentage points under the Goldman Sachs (GS.US) baseline scenario.