allmegawaysgames| Goldman Sachs "admits its mistake": no chance in July! The Fed will have to wait for interest rates to cut interest rates

Source: Jin Shi Data

Economists at Goldman Sachs Group adjusted their forecast and believed that the Federal Reserve would start cutting interest rates in September rather than previously expectedallmegawaysgamesIn July, U.S. economic data showed that economic resilience still existed, which was not enough reason to relax monetary policy.

"Earlier this week, we noted comments from Fed officials that a July rate cut would require not only improved inflation data, but also signs of significant weakness in economic activity or labor market data," Goldman Sachs economists including Jan Hatzius wrote in a report.

Goldman Sachs was one of the last banks on Wall Street to expect the Federal Reserve to start cutting interest rates in July. Goldman made the reversal as markets became increasingly convinced that policymakers would be cautious in easing policy given that the U.S. economy remained strong.

After U.S. durable goods orders data exceeded expectations in April, U.S. bond prices fell slightly, further dispelling expectations for the Federal Reserve to cut interest rates quickly. 10-year U.S. bond yields rose 1 basis point to 4allmegawaysgames.48%, close to the highest level in more than a week. The University of Michigan Consumer Confidence Index released late Friday recorded 69.1, beating expectations of 67.5.

Earlier this week, Nomura Securities also postponed its forecast from July to September, saying that "the threshold for (the Federal Reserve) interest rate cuts appears to have been raised." Goldman Sachs CEO David Solomon is more hawkish than his economists, saying he does not expect any rate cuts this year.

Based on pricing in the swap market, the market is currently fully pricing that the Fed's first interest rate cut will be in December. The chance of a second rate cut is less than 30%, compared with about 70% last week. By the end of 2023, the first interest rate cut was originally expected to be as early as March.

Data on Thursday showed U.S. business activity accelerated at the fastest pace in two years in early May. Atlanta Fed President Bostick said that this round of monetary policy is not as effective as previous cycles in slowing economic growth, emphasizing the need to maintain high interest rates for a long time to curb inflation.

Yields on 10-year U.S. bonds have risen by about 60 basis points year-to-date.

Despite this, Goldman Sachs still expects the Federal Reserve to cut interest rates twice by the end of 2024, with an average of once every quarter or every other meeting. This means that if things go according to its economists 'predictions, the Fed's second rate cut will occur in December.

A few institutions, such as JPMorgan Chase and Citigroup, remain the exceptions to insisting on predicting that the Federal Reserve will cut interest rates in July.

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