Goldman Sachs offers insights into the Federal Reserve's likely approach at the upcoming January FOMC meeting, with a focus on potential rate cuts and changes in the Fed's statement.
Possibility of a March Rate Cut:
- The market currently anticipates about a 50% chance of a Fed rate cut in March. Goldman Sachs expects the Fed to keep this option open during the January FOMC meeting.
Revising Statement Language:
- The Fed may adjust its statement to reflect a stance that maintains restrictive policy "until inflation is clearly moving down sustainably toward the Committee’s objective." This would be a subtle shift from previous language, signaling openness to a potential March rate cut.
Powell’s Press Conference Strategy:
- Chair Jerome Powell is likely to avoid a definitive stance on a March cut in his press conference. He might emphasize the significance of upcoming inflation data and revisions to the CPI, indicating that these factors will influence future policy decisions.
Dropping the “For Some Time” Qualifier:
- By omitting the phrase “for some time” from its statement, the Fed could subtly hint at the possibility of rate adjustments in the near future, including a March rate cut.
Goldman Sachs predicts a carefully calibrated approach from the Fed in the January FOMC meeting. By subtly altering its statement and avoiding definitive commitments in the press conference, the Fed is expected to leave the door open for a potential rate cut in March, while emphasizing the importance of upcoming economic data in shaping its policy decisions.