Goldman Sachs expects another Fed rate cut in December 2024. However, the pace of reductions may slow sooner than expected. That’s what lies behind it.
• Goldman Sachs expects further rate cuts in 2024 and 2025
• However, easing could slow sooner
• Fed officials call for more moderate interest rate policy
The US Federal Reserve (Fed) faces an important decision regarding another at its next meeting on December 18, 2024 Interest rate cut. “While the US election has broadened the range of possible economic outcomes, we continue to expect the Fed to cut rates again in December and early 2025,” Goldman Sachs writes on the company’s website.
However, Goldman Sachs admits that recent statements from Fed officials indicate that the Federal Open Market Committee (FOMC) may slow rate cuts sooner than initially thought. For this reason, the analysts adjusted their forecast for 2025: “We expect the FOMC to make consecutive rate cuts in the first quarter before slowing the pace towards the end of the rate cutting cycle in the second and third quarters of 2025.”
Powell surprises with more caution monetary policy: What this means for Fed interest rates
The comments from Jerome Powell, Chairman of the Federal Reserve, particularly made market participants sit up and take notice. Speaking at the New York Times’ DealBook Summit, Powell explains: “The good news is that we can afford to be a little more cautious as we try to become neutral.” The US economy remains robust, which could lead to a more moderate approach to the next monetary policy steps. Powell emphasized that the labor market has improved, growth has exceeded expectations and inflation remains moderate despite the recent increase.
Fed Governor Waller has doubts about cutting interest rates in December
Other Fed members have also raised the possibility of a slow pace of interest rate normalization. Fed Governor Christopher Waller said in a speech at the American Institute for Economic Research conference that he tends to support a rate cut in December 2024.
However, he acknowledged that recent inflation reports “have raised concerns that the FOMC should consider holding the federal funds rate steady at our upcoming meeting to gather more information about the future path of inflation and the economy.” Waller stressed that he would be “ready to hold the key interest rate this month” if upcoming data shows that the “forecasts for slowing inflation and a still solid but moderating economy are wrong.”
Interest rate cuts in danger: Fed presidents are in favor of a pause on interest rates
St. Louis Fed President Alberto Musalem also noted at the Bloomberg and Global Interdependence Center Symposium in New York: “…the time may be approaching to slow the pace of rate cuts or to pause the current rate cuts to carefully assess the economic environment, incoming information and the evolving perspective.”
San Francisco Fed President Mary Daly also spoke of the uncertainty of further interest rate cuts in an interview with Fox Business: “To keep the economy in a good place, we need to continue to recalibrate policy,” Daly said on Fox Business -Interview. “Whether it will be in December or later is a question we will debate and discuss in our next meeting…”
Fed in sight: Is the big interest rate brake coming now?
Markets are looking forward to the upcoming FOMC meeting on December 18th to see whether the Fed actually implements the announced 25 basis point rate hike and adjusts the pace of easing. Given the robust economic data and moderate inflation, the Fed could well adopt a more cautious monetary policy stance. A slowdown in rate cuts could signal the stability of the US economy and a move toward a neutral monetary policy stance.
Editorial team finanzen.net
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