Goldman Sachs Predicts Interest Rate Cuts by Federal Reserve and Meeting Expectations

B. Ali
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Goldman Sachs, a leading global investment bank, thinks that the Federal Reserve will lower interest rates next year. They also believe the Fed won’t raise interest rates at their next meeting. They believe that interest rates will likely drop by 0.25% every few months, but they’re not sure how fast exactly. Generally, it seems like they believe the Fed will make it easier for people to borrow money.

Therefore, this could impact various sectors. For example, reduced borrowing costs might stimulate consumer spending and business investments, potentially boosting economic growth. However, prolonged low rates could affect savers and distort asset pricing, warranting careful monitoring.

Experts Predict Possible Changes in Borrowing Costs by the Federal Reserve

Major bank Goldman Sachs anticipates that the Federal Reserve will start making borrowing money cheaper by the middle of next year. Meanwhile, the bank’s experts, Jan Hatzius and David Mericle, clarify that this isn’t due to a financial crisis, but rather an effort to normalize the situation.

They suggest that these rate cuts might occur every few months, but the exact pace is uncertain. Over time, they expect borrowing costs to stabilize around 3%-3.25%, a reasonable level. In simple terms, they’re predicting the Fed will ease loan accessibility, but how quickly remains uncertain.

Both Goldman Sachs and Bank of America believe the Fed could make borrowing money cheaper by mid-2024, potentially around May. Experts from these banks also suggest that the Fed won’t increase rates in their upcoming meeting.

They think the Fed officials will notice a slower rise in the cost of living, eliminating the need for rate hikes. It is worth noting that Fed has been actively working to control prices, and presently, the interest rate stands at approximately 5.25% to 5.5% – the highest since 2001.

Fed Officials Consider Interest Rate Changes to Control Prices

Michelle Bowman and other notable figures at the Fed are considering the option of raising interest rates once again. They believe this could help moderate the speed at which prices are rising, aiming for a target of around 2% inflation. Jerome Powell, who leads the Fed, mentioned that due to the current state of the economy, they might need to continue making borrowing a bit more expensive for a while. 

He expressed that if the situation requires it, they are prepared to take such action. This strategy is centered on maintaining control over the pace of price increases. Powell made these remarks following a recent minor increase in borrowing costs by the Fed.

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Live webinar speaker and derivatives (Forex, Crypto, and Indices) analyst with a broad range of skills for evaluating financial data, investment trends, technical analysis, fundamental analysis, and the best ways to strategies investment selection.  Expertise: Trading Psychology; Speculative Positioning & Market Sentiment; Technical & Fundamental Analysis.