Goldman pencils in first US Fed rate cut for second quarter of 2024
GOLDMAN Sachs Group economists anticipate the US Federal Reserve will start lowering interest rates by the end of next June, with a gradual, quarterly pace of reductions from that point.
“The cuts in our forecast are driven by this desire to normalise the funds rate from a restrictive level once inflation is closer to target,” Goldman economists including Jan Hatzius and David Mericle wrote in a note dated on Sunday (Aug 13).
For now, the Goldman team is pencilling in rate cuts to begin in the second quarter of 2024. The rate-setting Federal Open Market Committee (FOMC) is expected to skip a hike next month, and conclude at the November meeting “that the core inflation trend has slowed enough to make a final hike unnecessary”.
“Normalisation is not a particularly urgent motivation for cutting, and for that reason we also see a significant risk that the FOMC will instead hold steady,” the Goldman economists wrote. “We are pencilling in 25 basis points of cuts per quarter but are uncertain about the pace.”
Last week, data showed US inflation rose at a slower-than-expected headline rate of 3.2 per cent, with the core consumer price index – which strips out energy and food costs – running at a 4.7 per cent annual pace.
Fed policymakers in March 2022 began ramping up their target for the benchmark rate to a range of 5.25 per cent to 5.5 per cent.
“We expect the funds rate to eventually stabilise at 3-3.25 per cent,” Goldman’s team wrote. BLOOMBERG
Share with us your feedback on BT's products and services
