Goldman Sachs, a leader in global investment banking and securities solutions, has stirred up chatter with its bold prediction that the U.S. Federal Reserve (Fed) might start cutting interest rates as early as the third quarter (Q3) of 2024.
This forecast comes from a careful look at upcoming inflation and job market data, hinting at a change in the Fed’s recent cautious approach to rate hikes.
Goldman Sachs has adjusted its earlier prediction, moving it up from December 2024 to the more immediate Q3 of the same year. The expected rate cut, potentially twice as much as the one in 2019, is likely to happen as inflation rates ease. By the end of 2024, interest rates could dip to 4.875%, bringing some optimism to the market.
Healthy growth and robust labor market data suggest that immediate rate cuts are unlikely, but improving inflation metrics may accelerate normalization efforts
Jan Hatzius, renowned economist at Goldman Sachs.
Recent data on Personal Consumption Expenditures (PCE) and Consumer Price Index (CPI) show a softening trend in inflation, while robust job reports indicate the U.S. labor market’s resilience. The CME FedWatch Tool suggests a high likelihood (98.4%) that the Fed will stick to the current interest rate target of 5.25–5.50% at this week’s Federal Open Market Committee (FOMC) meeting.
As the possibility of Fed policy easing looms with cooling inflation rates, attention turns to an announcement by Fed Chair Jerome Powell. The crypto market, especially with the anticipated April halving, could be affected if rate cuts are delayed. The fate of Bitcoin, currently trading at $42,160 with a 24-hour fluctuation between $40,521 and $44,034, depends on the delicate balance with a stronger U.S. dollar.
Read More: Are We Ready for a Crypto Price Boom? Bitcoin Halving, Spot ETFs & More
Investors and traders are closely watching the Fed’s decisions, recognizing their potential to impact financial markets in the weeks ahead. The intricate connection between interest rate policies, inflation trends, and the labor market remains a focal point for market participants worldwide.
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