Goldman Sachs Group Inc.’s economists predict that the Federal Reserve will initiate a decline in interest rates by the end of the next June next year. This reduction is anticipated to occur measuredly, occurring quarterly after that time.
Goldman’s economists, Jan Hatzius and David Mericle, have elaborated that the adjustments outlined in their projection stem from the intention to readjust the funds’ rate from its current constraining level, particularly when inflation draws nearer to the targeted range.
Goldman sees 25 basis points cut per quarter
The Goldman team has projected that the rate reduction will commence during the second quarter of 2024. It is anticipated that the Federal Open Market Committee, responsible for determining rates, will abstain from raising rates in the upcoming month and, during the November meeting, conclude that the deceleration in the core inflation trend is significant enough to render a final rate hike unnecessary.
The economists pointed out that while the desire for normalization is not an especially pressing motive for implementing rate cuts, a notable likelihood exists that the FOMC will opt to maintain the current rates. The economists from Goldman Sachs have outlined a plan for reducing 25 basis points per quarter, but there remains uncertainty regarding the precise pace of these reductions.
Recent data demonstrated that US inflation experienced a slower-than-expected increase, with the headline rate reaching 3.2%. Simultaneously, the core consumer price index, which excludes energy and food expenses, exhibited an annual growth rate of 4.7%.
In March of 2022, Federal Reserve policymakers initiated a gradual increase in their target range for the benchmark rate, reaching a level between 5.25% and 5.5%. Goldman Sachs’ team of economists anticipates that the funds rate will stabilize from 3% to 3.25%.
