Goldman Sachs and Bank of America have revised their forecasts, signaling a shift in Wall Street’s outlook on Federal Reserve policy. Both firms now argue that resilient jobs data and persistent inflation justify delaying interest-rate cuts, pushing back against earlier expectations of easing monetary policy. Their stance reflects growing skepticism among financial institutions about the Fed’s readiness to lower rates before year-end.

The banks’ revised projections come after the Labor Department reported 3.6 million jobs added in July, surpassing economists’ estimates. This robust labor market, coupled with CPI data showing 3% inflation for the past quarter, has emboldened policymakers to maintain rates. Analysts suggest this could signal a policy pivot, delaying potential rate reductions until 2024 unless economic conditions deteriorate sharply.

Market reactions have been mixed, with bond markets pricing in a 50-basis-point cut by December—a timeline now under scrutiny. Bank of America’s chief economist warned that premature easing could fuel asset bubbles, while Goldman Sachs emphasized that wage growth and job creation trends “leave little room for error” in Fed decisions. Investors are closely monitoring speeches from Federal Reserve officials for clues on future actions.

This development underscores a critical divide between Wall Street and the central bank. While markets anticipate rate cuts, banks are hedging bets, highlighting risks of overestimating the Fed’s flexibility. If data trends persist, rate-cut expectations could face prolonged headwinds, reshaping investment strategies and lending practices across sectors.