Source: Wall Street News Author: Zhao Ying

Goldman Sachs adjusted the forecast for when the Federal Reserve will cut interest rates for the first time and postponed the original July judgment until September.

On Friday, Goldman Sachs analyst Jan Hatzius stated in his latest report:

Earlier this week, we pointed out that to push the Federal Reserve to cut interest rates in July, we need not only to see better inflation data, but also to show significant signs of weakness in economic activity or job market data.

However, against the backdrop of better-than-expected manufacturing PMI data for May and a drop in the number of first-time jobless claims, interest rate cuts in July are unlikely to be realized.

Goldman Sachs's latest forecast is in line with market expectations. According to the CME FedWatch Tool, the probability of cutting interest rates in September is 54%, while the probability in July is only 12%.

Goldman Sachs maintains the judgment that it expects the Federal Reserve to “cut interest rates once every quarter or every two meetings,” which means that the second rate cut has been postponed from October to December as previously anticipated. Goldman Sachs's expectation that the Federal Reserve will cut interest rates twice in total in 2024 remains unchanged.

Goldman Sachs said:

First, we continue to believe that the Fed's interest rate cut is “optional,” so there is no need to rush.

Second, although the inflation data may improve further by September, the year-on-year level is still above the 2% target, which makes the decision to cut interest rates at the time seem “unwise.”

Third, although senior management of the Federal Reserve is relatively relaxed about the inflation outlook, they are preparing to cut interest rates in the near future. However, some officials within the FOMC are still very concerned about inflation and are wary of cutting interest rates.

edit/lambor