Goldman Sachs Warns of 2027 Repo Market Crisis

Goldman Sachs has identified a potential repurchase agreement market crisis scheduled for 2027. This warning follows a shift in the firm's economic outlook after October Consumer Price Index data exceeded expectations, leading the bank to forecast a 25-basis-point Federal Reserve rate increase in March. This update extends the predicted hiking cycle beyond December, with rate cuts now delayed until December 2027.

The Federal Reserve faces conflicting pressures in November 2026, as it is expected to purchase Treasury bills to increase the money supply while managing rising rates. Governor Christopher Waller recently suggested a 50 basis point hike, and market data from CME FedWatch indicates a full expectation of a 25-basis-point increase on December 9. Deutsche Bank also expects hikes in December, January, and March.

Inflationary pressures are being driven by strong consumer demand, AI investment, oil price increases resulting from the Iran war, and import tariffs imposed by President Donald Trump. In response to these readings, Goldman Sachs economist David Mericle noted that FOMC participants will likely signal a third hike in the December dot plot, though he suggested the energy shock might feel largely over by the January or March meetings.