Pegging the probability of a U.S. recession at 35%, economists at Goldman Sachs now believe that the Federal Reserve will cut interest rates three times this year, according to multiple news reports that cite a research note issued to investors on Sunday.

Goldman Sachs economists had previously projected two rate cuts in 2025 and an additional cut next year and had put the chances of a recession at 20%, according to prior reporting. The National Bureau of Economic Research defines a recession as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

Now, the Goldman equity strategists reportedly see escalating tariff battles between the U.S. and key trading partners leading to a slowdown in economic growth, rising consumer prices and higher unemployment.

The Goldman Sachs projections stand in contrast to recent prognostications by mortgage giant Fannie Mae. On Friday, the government-sponsored enterprise said in its economic developments report that it foresees only one rate cut this year in September, followed by two additional cuts in 2026.

According to The Wall Street Journal, the Goldman Sachs research note predicts that the Fed will make three consecutive cuts to the benchmark federal funds rate in July, September and November. The Journal also reported that the Goldman economists raised their 2025 year-end core personal consumption expenditures (PCE) inflation forecast to 3.5% year over year.

On Friday, the Bureau of Economic Analysis (BEA) released data showing that its PCE price index, which measures the inflation or deflation of consumer expenses for goods and services, increased 2.5% year over year in February. Excluding food and energy, the BEA’s inflation barometer was up 2.8% from a year ago.

On a month-over-month basis, the PCE index excluding food and energy was up 0.4%. That was the biggest monthly gain since January 2024, according to BEA data.