In a report published by Goldman Sachs strategists, they predicted that the US Federal Reserve is unlikely to increase interest rates at the meeting to be held between October 31 and November 1.
Strategists also predicted the Fed would raise its economic growth forecasts when policymakers meet next week.
The report suggests that labor market rebalancing, positive news on inflation and the expected growth gap in the 4th quarter will convince more participants that the Federal Open Market Committee (FOMC) may pass on a final hike this year.
But Goldman’s strategists expect a narrow 9-to-10 majority on the Fed’s dot plot, which reflects policymakers’ interest rate projections, to indicate it will still make another hike just to maintain flexibility for now.
Futures tied to the Fed’s benchmark overnight interest rate were estimating a 98% chance the agency would leave rates unchanged at the end of its Sept. 19-20 meeting, according to CME Group’s FedWatch tool. The probability that the policy rate, which is currently in the range of 5.25%-5.50%, will not be changed at the October 31-November 1 meeting was calculated as approximately 72% on Saturday.
Goldman strategists also added that “gradual” interest rate cuts could be seen next year if inflation continues to cool. Analysts predict the central bank could raise its 2023 U.S. growth forecasts to 2.1% from 1% to reflect the economy’s resilience when policymakers update their economic projections on Wednesday.
They also expect the FED to lower its 2023 unemployment rate forecast by 0.2 percentage points to 3.9% and to lower its core inflation forecast by 0.4 percentage points to 3.5%.
*This is not investment advice.