Goldman Sachs predicts US government shutdown to end within two weeks, giving "more basis" for Fed rate cut in December?
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Goldman Sachs predicts US government shutdown to end within two weeks, giving "more basis" for Fed rate cut in December?
Goldman Sachs predicts the shutdown will "most likely end around the second week of November," but warns that key economic data releases will be delayed.
Navigating Web3 tides with focused insightsAuthor: Long Yue, Wall Street Insights
Following Citi, Goldman Sachs has also expressed optimistic expectations that the U.S. government shutdown could end "within two weeks," which is crucial for the Federal Reserve, an institution reliant on data for decision-making.
According to Wind Trading Desk, Goldman Sachs' latest analysis report indicates signs that the ongoing partial U.S. federal government shutdown may soon conclude, with the impasse most likely to be resolved around the second week of November.
Regarding how the shutdown affects the Fed's December interest rate decision, major Wall Street banks generally agree that the duration of the closure is the key variable. Earlier, Citi stated in a report that it was "growing increasingly confident" the government would reopen within the next two weeks.
Citi believes that once the government reopens, data releases will quickly resume, potentially providing the Fed with up to three employment reports before its December meeting—offering sufficient grounds to continue cutting rates by 25 basis points. As such, the bank maintains its baseline forecast for consecutive rate cuts by the Fed in December, January, and March.
Impasse有望打破，高盛预言「两周内」结束
Although this government shutdown has nearly matched the 35-day record from 2018–2019, Goldman Sachs believes the "end is closer than the beginning."
The report notes that the prolonged shutdown has been partly due to unconventional measures taken by the Trump administration, such as using leftover funds from last year to temporarily cover military salaries and other expenses, thereby alleviating some tensions. However, this financial flexibility is now dwindling. As negative impacts accumulate, several critical pressure points are pushing both parties in Congress toward compromise.
First, air traffic controllers and airport security personnel missed their first full payday on October 28. This increases the risk of flight delays, especially as the second payday approaches on November 10. The 2018–2019 shutdown experience showed that air travel disruptions were a powerful catalyst for reopening the government.
Second, payments under the Supplemental Nutrition Assistance Program (SNAP), or food stamps, have been interrupted. Although court rulings require the government to use emergency funds to cover some benefits, payment delays have already occurred.
Third, congressional staff salaries are also affected, which may directly push lawmakers to reach a compromise more quickly.
In addition, certain political calendars may create windows for agreement. The report notes elections in several states on November 4 and Congress’s planned recess after November 7 as potential motivators for reaching a deal before then.
Overall, Goldman Sachs currently expects the shutdown to "most likely end around the second week of November."
Will a December rate cut happen? Rate outlook hinges on shutdown duration
According to Goldman Sachs’ projections, if the government reopens around mid-November, the Bureau of Labor Statistics (BLS) might need several days to release the delayed September jobs report. More importantly, the November jobs report scheduled for December 5 and the November CPI report set for December 10 both face a risk of being delayed by about a week.
Employment and inflation are the two core pillars of the Fed’s monetary policy decisions. However, the report states it remains unclear how the BLS will handle the missing October data.
Nonetheless, a Wall Street Insights article noted that Citigroup analyst Andrew Hollenhorst’s team is more optimistic.
In a report, they stated they are "growing increasingly confident" the government shutdown will end within the next two weeks. Once operations resume, data releases are expected to rebound quickly, potentially giving the Fed access to as many as three jobs reports before its December meeting—providing strong justification for another 25-basis-point rate cut.
Therefore, Citi maintains its base-case forecast for consecutive rate cuts by the Fed in December, January, and March.
Meanwhile, Morgan Stanley economist Michael T. Gapen’s team believes the longer the shutdown lasts, the lower the likelihood of a December rate cut, outlining three scenarios:
Scenario One: Ends next week. If the government reopens quickly, the Fed would likely receive job reports for September, October, and November, along with September CPI, and possibly October CPI, retail sales, and other key data before its December meeting. Morgan Stanley believes this volume of data would be sufficient to support a rate cut decision.
Scenario Two: Ends mid-November. In this case, data availability becomes "more limited." The Fed may only receive September reports on employment, retail sales, and inflation. However, Morgan Stanley analysis suggests state-level unemployment data and private-sector indicators could partially fill the gaps, leaving a rate cut still possible.
Scenario Three: Ends after Thanksgiving (late November). This is the most pessimistic scenario. In this case, the Fed would likely only have access to September CPI and employment data, while key indicators like September retail sales might not be available at all. Under such a "data vacuum," unless there are strong deteriorating signals from state-level or private-sector data, the likelihood of the Fed pausing rate cuts in December would be significantly higher.
Economic costs emerge: Q4 GDP growth may suffer severe blow
Beyond affecting Fed decisions, the economic cost of this shutdown is also significant. Goldman Sachs emphasized in its report that this shutdown could not only be the longest in duration but also broader in scope than previous ones, impacting far more agencies than earlier shutdowns limited to a few departments.
Goldman Sachs economists estimate that if the shutdown lasts about six weeks, the forced furlough of federal employees would reduce the seasonally adjusted annualized real GDP growth for the fourth quarter of 2025 by 1.15 percentage points. Consequently, the firm has downgraded its Q4 GDP growth forecast to 1.0%.
However, most of this impact is expected to be temporary. The report projects that as furloughed workers return and some federal procurement and investment shift from Q4 2025 to Q1 2026, first-quarter GDP growth in 2026 will receive a 1.3-percentage-point boost, raising the forecast for that quarter to 3.1%.
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