Goldman Sachs is back again with a forecast that is not good for the US economy. According to them, there's no chance of interest rate cuts in the 2023 (next year). They even said that Fed's battle with inflation will continue into 2023 and even 2024.
Goldman Sachs believes that when it comes to policy action, there's a lot of ground to cover for the Fed. If we look at the Fed policy, it becomes clear that it is relying entirely on controlling the inflation data. And after the recent CPI release, the experts from Goldman Sachs have come up with this new forecast.
Right now, there are a lot of rumors in the markets that the Fed could soon change its policy in 203 and would introduce interest rate cuts. But Goldman Sachs says this is highly unlikely that the Fed would take a U-turn from its policy any time soon.
So based on Goldman Sachs, there's no chance of any rate cuts in the 203. However, there's a chance that the Fed will slow down its speed of raising interest rates since the CPI data shows signs of slowing down.
For the upcoming December meeting, it will become clear whether the Fed actually announces any plans to slow down its pace or not. But for the February meeting, Goldman Sachs believes that the interest rate hike would be somewhere around 25 basis points.
We also need to consider that the last Fed meeting of 2022 is almost here, and the market is expecting a 50 basis points hike in interest rates. Earlier, the Fed was raising rates by 75 basis points during the previous 4 meetings.
The highlight of the Goldman Sachs forecast was that the price pressure would continue to give a strong fight to the Fed. In fact, this fight will continue during 2023 and 2024 (for the next 2 years). They also stressed the need for the Fed would have to do a lot more work to bring down inflation.