Fed is unlikely to cut interest rates until 2024, says Goldman Sachs

According to Goldman Sachs strategists, the Federal Reserve is unlikely to reverse its benchmark rate through 2024 and cut it to 2024 as it attempts to crush the highest inflation rate in four decades.

The bank’s economists — led by Jan Hatzius — predicted in an analyst note Monday that the U.S. Federal Reserve will raise interest rates four more times between now and the end of 2023, eventually raising it between 4.25% and 4.50% until 2024. will keep. .

The analyst note comes ahead of the Fed’s two-day meeting this week, when Hatzius now sees policymakers approve a third straight rate hike of 75 basis points – tripling the usual size.

Goldman Sachs then predicted that the Fed will make consecutive increases of half a percentage point in November and December, followed by a quarter of a percentage point increase in 2023 and a rate cut in 2024.

INFLATION INCREASED FASTER THAN EXPECTED IN AUGUST, AND PRICES KEEP PAINFULLY HIGH

Fed Chair Jerome Powell

Jerome Powell, chairman of the US Federal Reserve, speaks at a press conference in Washington, DC, on May 4, 2022. (Al Drago/Bloomberg via Getty Images/Getty Images)

“We see several reasons for the change of plan,” Hatzius wrote. The stock market threatened to undo some of the tightening in financial conditions the Fed had been developing, the strength of the labor market reduced fears of tightening too far at this stage, Fed officials now seem to be making somewhat faster and more consistent progress. want to reverse overheating, and some would have reevaluated short-term neutral interest rates.”

While Goldman economists, like many other experts, initially thought the Fed would reduce the size of rate hikes after July, that changed after August inflation data released last week came in hotter than expected. The consumer price index rose unexpectedly in August by 0.1% from the previous month, terrifying hopes of a slowdown. On an annual basis, prices rose 8.3% – almost the highest level since 1981.

Shares fell sharply after the surprisingly hot report on fears of an even more aggressive fedwith the Dow dropping 1,276 points – the worst day since June 2020.

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Goldman Sachs

Goldman Sachs economists predict that the Fed will raise interest rates four more times before the end of 2023. (Reuters/Andrew Kelly/File Photo/Reuters Photos)

Investors are already bracing for the Fed’s policy-making meeting, which will take place on September 20-21.

Traders are betting on officials to approve another super-big 75 basis point rate hike — the third of its kind this year — by the end of the meeting — though some are Wall Street think central bankers could get even bigger with a full point increase.

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