According to financial giant Goldman Sachs, the US Federal Reserve may begin to cut interest rates by the third quarter (Q3) of 2024. The financial institution’s forecast depends on the upcoming inflation and job market data, which could cause the Fed to change its stance on rate hikes.
Although there is no fixed timeline for when the Fed may cut interest rates, Goldman Sachs anticipates it to occur between Q3 and December 2024. Moreover, the rate cut could be double that of the 2019 cut. According to Goldman Sachs, rates may drop to 4.875%.
Also Read: Euro Zone Inflation Falls More Than Expected to 2.4%
According to Jan Hatzius, an economist at Goldman Sachs, Healthy growth and robust labor market data suggest that immediate rate cuts are unlikely, but improving inflation metrics may accelerate normalization efforts.
Will the Fed pause interest rates in December 2023?
The last few Consumption Expenditures (PCE) and Consumer Price Index (CPI) data indicate that inflation may be cooling. Moreover, robust job reports show a resilient US labor market. According to the CME FedWatch Tool, there is a 98.4% probability that the Fed will maintain the current interest rate target of 5.25–5.50%. The US CPI data for November is due tomorrow, and Fed Chair Jerome Powell’s speech later this week may give hints about the Fed’s plan of action.
Also Read: US Inflation Falls to 3.2%
The upcoming CPI data may have also brought some volatility in the cryptocurrency market. Bitcoin (BTC) fell below $42k after surpassing the $44k mark last week. However, analysts anticipate inflation in the US to have cooled. Economists expect a 3.0% increase in the overall price index and a 4% increase in the core categories. The data seems slower than October’s 3.2%, where it fell for the first time in three months.
Inflation numbers have significantly dropped since 2022, although it is still over the Fed’s 2% target.