The U.S. Federal Reserve will only start cutting interest rates in September, according to economists at Goldman Sachs Group Inc., who pushed back their call from July amid signs the economy is still too resilient to justify easing. 

“Earlier this week, we noted that comments from Fed officials suggested that a July cut would likely require not just better inflation numbers but also meaningful signs of softness in the activity or labour market data,” economists including Jan Hatzius wrote in a note. 

Goldman Sachs had been one of the last banks on Wall Street betting the Fed would start lowering interest rates in July. Earlier this week, Nomura Securities also pushed their call from July to September, saying “the threshold for rate cuts appears to have risen.” 

On Thursday, data showed U.S. business activity accelerated in early May at the fastest pace in two years. Federal Reserve Bank of Atlanta President Raphael Bostic later that day said monetary policy has been less effective in slowing growth than in previous cycles, reinforcing the need to keep rates higher for longer to curb inflation.

The first interest-rate cut from the Fed is now only fully priced by December, according to pricing in the swap market. The odds of a second reduction stand at less than 40 per cent, compared with about 70 per cent last week. At the end of 2023, the first Fed cut was expected as early as March.

Goldman Sachs still expects the Fed to deliver two cuts in total through 2024, with one per quarter, or every other meeting. That means the second reduction would now come in December, according its economists. 

JPMorgan Chase & Co. and Citigroup Inc. are among the few holdouts still forecasting a July move.

Reports on durable goods orders and the University of Michigan consumer sentiment gauge, both due later Friday, will give further insight into the state of the U.S. economy. U.S. Treasuries are heading for their first weekly loss this month, reflecting doubts over how soon policymakers can ease.