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Goldman Sachs revises U.S. interest rate forecast, predicts slower rate cuts!


Goldman Sachs revises U.S. interest rate forecast

Analysts at Goldman Sachs have updated their forecast regarding the U.S. interest rate policy, signaling a notable shift from their earlier expectations. Initially, they anticipated a rate cut by the U.S. Federal Reserve in May, but recent developments and statements from Federal Reserve officials have led them to revise this view.


This change indicates a more cautious or conservative approach to monetary policy than previously expected, reflecting the complexities of managing economic growth and inflation.


The reassessment by Goldman Sachs comes in the wake of comments from Federal Reserve Governor Christopher Waller. Waller highlighted the importance of gathering more comprehensive inflation data over an extended period.



His statement underscores the Federal Reserve's commitment to making informed, data-driven decisions. This approach is crucial for ensuring that the steps taken are in line with the primary goal of achieving and maintaining price stability in the economy.


Waller's insistence on the need for additional inflation data before proceeding with any rate adjustments has significant implications. His comments suggest a deliberate and measured approach to monetary policy, prioritizing the acquisition of sufficient economic data.


This stance reflects the Federal Reserve's focus on maintaining economic stability and its cautious approach to making changes that could impact inflation and economic growth.



Goldman Sachs analysts, interpreting Waller's remarks, have concluded that an interest rate cut as early as May is now unlikely. Their previous forecast had included such a cut, but the limited amount of inflation data currently available—only two rounds—and the short time frame until the May meeting of the Federal Reserve have led them to reassess this position.


This shift in their forecast demonstrates the impact of Federal Reserve communications on market expectations and the importance of closely monitoring economic indicators.


Consequently, Goldman Sachs now forecasts a different pattern of interest rate adjustments for the year. They predict four rate cuts of 25 basis points each, diverging from their earlier predictions. This adjustment in their forecast suggests a more gradual approach to easing monetary policy.


Additionally, they anticipate an extra rate cut next year, while maintaining their projection for the terminal rate to remain within the 3.25% to 3.5% range. This revised outlook takes into account the latest economic data and Federal Reserve statements, indicating Goldman Sachs' responsiveness to changing economic conditions and policy signals.


23.02.2024



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