Goldman Sachs has changed its tune again: The first interest rate cut by the Federal Reserve is now expected to be postponed until June.
Goldman Sachs pointed out that they expect 4 interest rate cuts this year, down from the previous expectation of 5 cuts.
Goldman Sachs has postponed the first interest rate cut twice within a month, is the Fed's interest rate cut expectation being overturned again?
In the latest report released on Thursday, analysts including Jan Hatzius from Goldman Sachs have postponed the expected time of the first interest rate cut by the Fed from May to June.
At the same time, Goldman Sachs has reduced the expected number of interest rate cuts, predicting a total of 4 cuts this year in June, July, September, and December, compared to the previous forecast by FOMC of 5 cuts by 2024. Additionally, Goldman Sachs believes there will be 4 more interest rate cuts next year, up from 3 previously, with the final interest rate expected to remain at 3.25%-3.5%.
It is worth noting that this is the second time within a month that Goldman Sachs has lowered its interest rate cut expectations. Previously, Powell stated that an interest rate cut in March was unlikely, and Goldman Sachs, which was "slapped in the face," hastily postponed the first interest rate cut expectation from March to May.
In the report, Hatzius and Goldman Sachs economists pointed out two changes in the thinking of FOMC members:
With the release of strong economic data, officials are less concerned about maintaining high interest rates in the long term. They believe that the greatest risks brought by rate hikes are in the past, which means that an interest rate cut is not urgent.
Secondly, Fed officials hope to have more concrete evidence that the inflation rate will approach 2% before cutting rates, partly because some are concerned that strong economic performance may hinder further inflation decline.
Recent fluctuations in inflation, CPI data exceeding expectations, combined with the Fed's "cold water pouring," several Fed officials have spoken hawkishly, stating that they need more confidence in further inflation decline before considering a rate cut. Market expectations for rate cuts are once again in turmoil, with the CME Group's FedWatch tool showing only a 20% probability of a rate cut at the Fed's May monetary policy meeting.
