Goldman Sachs, a prominent investment bank, predicts a possible delay in the interest rate hike scheduled for November.
Reasoning Behind the Delay
In a recent report, Goldman Sachs’ strategists outlined several factors contributing to their prediction. They emphasized the need for further rebalancing of the labor market before the Federal Reserve considers raising interest rates again. This suggests that the Central Bank may be waiting for sustained improvements in employment data before tightening monetary policy.
The strategists also noted positive developments in inflation, which has been a major concern. Goldman Sachs anticipates that improved inflation data could alleviate the pressure for an immediate rate hike.
Furthermore, the strategists mentioned an expected slowdown in economic growth in the fourth quarter. They highlighted that such a deceleration could prompt the Federal Reserve to postpone any interest rate increases, as they prefer to assess the economy’s resilience before taking action.
Looking ahead to next year, Goldman Sachs’ strategists suggest the possibility of gradual rate cuts if inflation continues to cool. They also anticipate the Federal Reserve to revise its estimates for 2023 U.S. growth from 1% to 2.1%, reflecting the economy’s resilience.
Market participants are closely monitoring the Fed’s actions and sentiments, particularly considering the recent history of monetary policy tightening.
Notably, major investors such as J.P. Morgan Asset Management and Janus Henderson Investors believe that the Central Bank may have concluded its rate hike cycle, marking the end of one of the most aggressive phases of monetary policy tightening in decades.
Futures tied to the Fed’s benchmark overnight interest rate indicate that market participants overwhelmingly expect no change in rates at the September 19-20 meeting. According to CME Group’s FedWatch Tool, the probability of rates remaining unchanged at the October 31-November 1 meeting is approximately 72%.
These odds reflect market sentiments aligned with a unanimous vote by the Fed to maintain steady interest rates.