Goldman Sachs: GS 337.74 -0.88% + Selected economists expect the Fed to start cutting interest rates by the end of June next year and gradually cut rates quarterly from then.
Goldman economists including Jan Hatzius and David Mericle wrote in a note on Sunday, "We lower our forecasts as the Fed moves to normalize interest rates from restrictive levels once inflation approaches the target."
Currently, the Goldman Sachs team expects the Fed to start cutting rates in the second quarter of 2024. The Federal Open Market Committee (FOMC), which sets interest rates, is expected to skip a rate hike next month, concluding at its November meeting that “core inflation trends have slowed enough to make a final hike unnecessary. "
"Normalization of interest rates is not a particularly urgent motivation for rate cuts, so we also see significant risks to the FOMC holding rates steady," Goldman economists also wrote. "We expect 25 basis points of rate cuts per quarter, but the pace of rate cuts is uncertain."
The data released by the US Bureau of Labor Statistics last week showed that the US CPI rose by 3.2% year-on-year in July, lower than the expected 3.3%. After excluding volatile food and energy prices, the U.S. core CPI rose 4.7% year-on-year in July, the lowest gain since October 2021.
The Goldman Sachs team expects the federal funds rate to eventually stabilize at 3-3.25%.
The U.S. federal funds rate target range is currently at 5.25% to 5.5%, the highest level since 2001. At the end of last month, the Federal Reserve raised interest rates for the 11th time since March last year, with a cumulative rate hike of 525 basis points in order to curb high inflation.
According to CME Group's "Fed Watch" tool, the most mainstream view in the market at the moment is that the Fed will not raise interest rates further in this tightening cycle, and the probability of keeping interest rates unchanged in September is as high as nearly 90%. Execute the first rate cut.
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