Goldman’s Solomon: softening job market may justify half-point Fed rate cut

Goldman Sachs (NYSE:GS) CEO David Solomon’s best guess is that the Federal Reserve will cut interest rates by the standard 25-basis-point increment when the Federal Open Market Committee meets next week. He did, however, lay out a case for a jumbo quarter-point rate reduction, amid growing signs of a weakening labor market.

“There’s a case to be made for 50 based on more softening in the labor market,” Solomon said in a CNBC interview. “I think the percentage chance is in the low 30s.” Fed officials have cited a weakening employment market as a rationale for accelerating the pace of easing in the months ahead.

Through the end of 2024, The 62-year-old thinks the central bank could pull the federal funds rate down two or three times. In July, he had penciled in up to two rate cuts for the year, and, in May, he didn’t foresee any rate cuts.

Solomon’s assessment broadly aligns with that of the market, which now is a lot more confident the Fed will cut by a quarter-point on Sept. 18 rather than a half-point, following an unexpected acceleration in core consumer prices.