work
Aug 14, 2023 | 12:07 PM
The Federal Reserve will cut interest rates as inflation eases, according to a Goldman Sachs report.
Getty Images
Goldman Sachs says rate cuts will not ease until the second quarter of next year as the Federal Reserve is desperate to keep inflation under control despite concerns that the U.S. economy is becoming increasingly unstable. I expect not to.
The Fed’s first rate cut could come in May 2024, likely by 0.25 percentage points, but more cuts after that, according to a report released on Sunday by Fed chief economist Jan Hadzius. The pace remains unclear, he said.
The report says Fed Chairman Jerome Powell is likely to err on the side of caution and make sure inflation subsides before cutting rates again.
“Fed officials will want to minimize the risk of regretting rate cuts if inflation remains elevated,” the report said.
The Fed’s current base rate is between 5.25% and 5.5%, the highest in more than 20 years.
Prolonged high interest rates have caused investors to worry that aggressive rate hikes could send the economy into recession.
But the report said inflation remains the Fed’s main concern, and it doesn’t factor in the possibility of a recession in its decision to cut rates.
“Our downward revision to our outlook is not due to a recession, but to our desire to normalize fund rates from restrictive levels once inflation approaches its target,” the report said. ing.
Inflation was 3.2% in July, according to the latest CPI report.
That figure is down significantly from the June 2022 inflation high of 9.1%, but still falls short of the Fed’s target of 2%.
“When people are writing down next year’s rate cut, it’s just a sense that inflation is falling, and we’re comfortable with that, and we’re comfortable with the rate cut,” Powell said at a press conference last month. It’s time to start,” he said. .
Powell conceded that inflation was heading in the right direction, but added that it was too early to know what would happen.
“But I mean, there’s a lot of uncertainty about what’s going to happen in the next conference cycle, let alone next year or the year after,” he added.
load more…
{{#isDisplay}}
{{/isDisplay}}{{#isAniviewVideo}}
{{/isAniviewVideo}}{{#isSRVideo}}
{{/isSR video}}