Goldman Pushes Back Bet on First Fed Interest-Rate Cut to June
2024-02-23 06:49:02.283 GMT

By Malcolm Scott
(Bloomberg) — Goldman Sachs Group Inc. economists have
pushed back their view on when the Federal Reserve will begin
cutting interest rates to June after parsing recent comments
from the central bank and minutes of its January meeting.
The US investment bank has dropped its forecast for a May
cut and now expects four reductions this year, versus five
previously, with moves in June, July, September and December. It
now sees four more cuts next year, versus a prior three, leaving
the same terminal rate of 3.25%-3.5%, economists including Jan
Hatzius wrote in a note dated Feb. 22.
Three top Fed officials hammered home the message Thursday
that the US central bank is still on track to cut interest rates
this year — just not anytime soon. As recently as mid-January,
investors and some economists were betting on the Fed to start
lowering rates at its March 19-20 meeting.
Hatzius and the Goldman economists note two changes in the
Fed’s thinking.
With strong economic data, officials have become less
worried about keeping rates too high for too long and see the
largest risks from past rate hikes having passed, meaning “cuts
are therefore not urgently needed.”
Secondly, Fed officials want more definitive evidence that
inflation will approach 2% before cutting, “in part because some
worry that the stronger performance of the economy could inhibit
further progress in reducing inflation,” the economists wrote in
the note.