Goldman Sachs sheds light on its expectations regarding the future rate adjustments by the Federal Reserve (Fed) and the European Central Bank (ECB). The firm anticipates the Fed's hiking cycle to be complete, while one final hike from the ECB is in the forecast.

Key Points:

• Fed's Stance: Goldman believes that the Fed has wrapped up its cycle of rate hikes, with the intention of maintaining the current Fed funds rate range of 5.25-5.5% till 2024. The first rate reduction is anticipated in the second quarter of 2024, which is expected to proceed at a pace of 25bp per quarter. The projected stabilization for the Fed funds rate range is between 3-3.25%.

• ECB's Next Moves: For the European Central Bank, Goldman forecasts a final rate hike of 25 basis points in September, leading to a terminal rate of 4.00%. This expectation is grounded in the persistent services inflation observed in Europe. Post this hike, the ECB is predicted to stay on hold until the fourth quarter of 2024.

Summary:

Goldman Sachs' projection signals an end to the Fed's interest rate hikes while forecasting one last hike from the ECB in the upcoming month. The rationale for the ECB's hike stems from the sustained services inflation, even as the central bank's longer-term stance is anticipated to remain relatively unchanged until late 2024.