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Feb 01 - 06:55 PM

Goldman Sachs: Adjusting the Timeline for Fed's Rate Cuts

By eFXdata  —  Feb 01 - 03:00 PM

Synopsis:

Goldman Sachs revises its forecast for the Federal Reserve's monetary policy, delaying the anticipated initial rate cut from March to May 2024. Despite a dovish tone at the recent FOMC press conference, Chair Powell's remarks suggest a March rate cut is unlikely.

Key Insights:

  • Shift in Rate Cut Timing: Goldman Sachs now predicts the first Fed rate reduction in May 2024, diverging from an earlier March expectation. This adjustment is prompted by Chair Powell's comments and projections of sustained economic growth and short-term inflation firming.

  • Continued Rate Cut Expectations: Despite the timeline adjustment, Goldman Sachs anticipates a series of rate cuts throughout 2024 and into 2025. The firm forecasts a total of five cuts in 2024, followed by three additional cuts in 2025, driven by inflation falling below the FOMC's projections.

  • Rate Cut Schedule: Goldman Sachs envisions a rapid sequence of rate cuts in the mid-2024, with reductions at the May, June, July, and September meetings, concluding with a final 2024 cut in December. The forecast aligns closely with 2024 expectations but is more dovish for 2025, though still less aggressive than current market predictions.

Conclusion:

Goldman Sachs's updated forecast underscores a nuanced view of the Fed's policy path, balancing recent dovish signals against economic and inflationary trends. While delaying the onset of rate cuts, Goldman maintains a perspective of substantial easing over the next two years, aligning its outlook with evolving economic indicators and Fed communications. This revised stance indicates a cautious yet responsive approach to monetary policy adjustments in response to inflationary dynamics and growth prospects.

Source:
Goldman Sachs Research/Market Commentary

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