Goldman Fed forecast

Goldman Sachs economists expect the Fed to make its first rate cut in the second quarter of 2024. The Fed will begin cutting interest rates by the end of June, at a gradual pace of reductions every three months. “The cuts to our forecast are driven by a desire to normalize the funds rate from a restrictive level once inflation approaches target,” Goldman economists including Jan Hatzius and David Mericle said in a note. The Goldman team expects rate cuts to begin in the second quarter of 2024. The Federal Open Market Committee, which sets the rate, is expected to skip an increase next month and conclude that “the core inflation trend is over” at its November meeting. “Normalization is not an immediate motivator for a rate cut, and therefore the FOMC could instead decide to hold steady. We expect cuts of 25 basis points, but we are not confident about the pace,” Goldman economists said. Last week, data showed U.S. inflation rising at a slower-than-expected 3.2% rate, with the core consumer price index, which excludes energy and food costs, advancing at an annualized 4.7% pace. In March 2022, Fed policymakers began raising their benchmark interest rate target to a range of 5.25% to 5.5%. “We expect the funds rate to eventually stabilize at 3%-3.25%,” Goldman’s team wrote.