
Goldman Sachs has lowered its forecasts for US debt yields by the end of 2025, citing the potential for an economic slowdown due to tariffs, which could prompt the Federal Reserve to cut interest rates more than policymakers anticipate.
The investment bank’s strategists said in a note that they now expect the 2-year Treasury yield to reach 3.3 percent by the end of this year, and the 10-year yield to hit 4 percent, compared to previous estimates of 3.95 percent and 4.35 percent, respectively.
They explained that a cumulative 15 percent increase in US tariff rates could push annual core personal consumption expenditures (PCE) inflation – the Fed’s preferred inflation gauge – to 3.5 percent, according to MarketWatch.
However, they anticipate that the economy will slow down as a result of the tariffs, which will lead the Fed to implement three interest rate cuts starting in July, compared to the Federal Open Market Committee’s (FOMC) forecast of only two rate cuts this year.