Final Fed Rate Hike Looms, But Top Wall Street Analyst Predicts A Year-Long Wait Before Rate Cuts
A prominent investment bank located in the financial district of New York City anticipates that the Federal Reserve will halt its upward adjustment of interest rates following its meeting in July. However, it advises investors against expecting a decrease in rates in the immediate time ahead.
Goldman Sachs predicts that the forthcoming interest rate increase during the Federal Reserve's July gathering, which will bring rates to approximately 5.25% to 5.5%, will probably mark the conclusion of the current phase.
According to David Mericle, the bank's economist in the United States, the decrease in core CPI inflation to 4.8% in June is viewed as a significant moment in the story of inflation.
According to economists from Goldman Sachs, it is anticipated that most members of the board will eventually back the decision to forgo a rise in interest rates in September, as inflation continues to decrease.
Goldman Sachs expects that by the November meeting, there will be a decrease in core inflation, which would result in the Federal Open Market Committee (FOMC) not considering a second hike.
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U.S. Inflation Slowed Significantly In Past Year
No Rate Cuts Coming Soon
In contrast, Goldman Sachs holds the belief that reductions in interest rates are not expected in the near future.
The financial institution anticipates that the Federal Reserve will adopt a more cautious approach in contrast to what the market foresees. It is likely that the initial reduction in interest rates will occur sometime in the second quarter of 2024.
There are three main reasons why this perspective is supported: the slim chance of the U.S. economy experiencing a recession, the strict criteria for reducing interest rates due to the strong economy and limited job market, and the preference for a gradual reduction strategy as rapid cuts in the absence of a recession lack convincing justification.
Goldman Sachs also recognizes that in the future, the FOMC may choose not to lower interest rates if the economy continues to outperform expectations, unemployment rates hit unprecedented lows, and financial conditions improve even more.
The bank believes that there is a significant likelihood (30%) that there will be no reductions in interest rates next year.
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