Goldman sees 2.8% global growth in 2027, two Fed hikes

Goldman Sachs Research expects the world economy to grow 2.8% in 2027, slightly faster than the estimated 2.7% for this year. The bank says lower energy prices and continued spending on artificial intelligence should more than offset tighter financial conditions and a shrinking fiscal boost, according to its 2027 outlook published Friday, November 13. It also forecasts two more Federal Reserve rate hikes before the Fed starts cutting late next year.goldmansachs.com

"We expect another year of solid but unremarkable GDP growth in 2027, but several of the impulses that shaped global growth in 2026 will look different," wrote Jan Hatzius, the bank's chief economist. He projects faster-than-consensus growth in the US, Japan and the UK, and a weaker outlook for Europe. Goldman puts US growth at 2.4%, euro-area growth at 0.9% and China's at 4.5%, Seeking Alpha reported.seekingalpha.com

Energy and AI drive the outlook

Goldman's commodity strategists expect Brent crude to fall to $78 a barrel by the end of 2027 as Middle East supply keeps adjusting. That would turn energy from a drag on growth into a modest boost, though Europe will keep feeling the effects of costs that reach consumers with a delay. The bank forecasts that nominal global AI investment will rise to $1.8 trillion in 2027 from $1.1 trillion this year, adding about 0.4 percentage point to global growth. Most of that increase comes from more than $500 billion in additional US hardware spending.goldmansachs.com

The bank's equity strategists expect the AI investment push to peak, with S&P 500 ↘ 0.36% earnings growth slowing from 36% in 2026 to 11% in 2027, according to Yahoo Finance.finance.yahoo.com

Hikes first, then cuts

Goldman expects the Fed to raise rates in December and again in March because inflation pressures are lingering. It then sees one cut in December 2027 and three more in 2028, bringing rates to 3.25%–3.5%. The bank gives this baseline a 50% probability. It assigns 35% to a scenario with an extra hike and 15% to a recession.seekingalpha.com+1

The March hike was added after October's consumer price report came in hotter than expected. Consumer prices rose 0.4% that month, compared with the 0.3% economists had forecast, The News & Observer reported. Goldman still expects US core PCE inflation, the Fed's preferred measure, to slow from 3.2% at the end of 2026 to 2.4% by the end of 2027 as the effects of tariffs fade.newsobserver.com

Risks lean to the downside

Hatzius warned that the risks to the forecast "are tilted to the downside." He pointed to three main threats. Renewed fighting involving Iran could push energy prices up again, large fiscal deficits could drive long-term bond yields higher, particularly in France, and AI spending could come in lower than expected. He also sees early signs that AI adoption is weighing on the job market.goldmansachs.com

"We see more dovish rate risks in the US than in most other economies, both because US inflation drivers look more clearly temporary and because the US is most exposed to a downturn in the AI cycle," Hatzius wrote.