Goldman Sachs adjusted its expectations for the timing of the Federal Reserve's first interest rate cut, postponing its original prediction of July to September.
Jan Hatzius, an analyst at Goldman Sachs, said in a recent report on Friday:
Earlier this week, we noted that pushing for the Fed to cut interest rates in July would require not only better inflation data, but also significant signs of weakness in economic activity or labor market data.
But with stronger-than-expected manufacturing PMI data in May and a decline in the number of first-time unemployment benefit applications, a rate cut in July is unlikely.
Goldman Sachs' latest forecast is consistent with market expectations. According to the CME FedWatch Tool, there is a 54% chance of a rate cut in September, while the probability in July is only 12%.
First, we continue to believe that a Fed rate cut is âoptionalâ and therefore there is no need to rush.
Secondly, although 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 that time seem "not so wise."
Third, although the top Fed officials and we are relatively relaxed about the inflation outlook and are ready to cut interest rates in the near future, some officials within the FOMC are still concerned about inflation and are cautious about cutting interest rates.
