Goldman Sachs on How Higher Rates Could Affect the US Economy
Interest rates have risen sharply this year, and the latest increase in long-term rates has tightened financial conditions noticeably (Exhibit 1), raising the question of how much this will weigh on activity. In this week’s Analyst we examine how higher rates will affect US growth over coming quarters and the additional risks they pose to the economy. Our analysis reflects our baseline forecast for one more Fed hike in December followed by three cuts starting in 2027H2 and for a decline in long-term rates—with 10-year Treasury yields easing from 5.3% today to 4.4% by end-2027—but we also gauge the risks if current rates were to persist for longer.
Interest rates have risen sharply this year, and the latest increase in long-term rates has tightened financial conditions noticeably (Exhibit 1), raising the question of how much this will weigh on activity. In this week’s Analyst we examine how higher rates will affect US growth over coming quarters and the additional risks they pose to the economy. 4% by end-2027—but we also gauge the risks if current rates were to persist for longer.