Goldman Sachs Delays Fed Rate Cut Forecast Citing Strong US Economy

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Goldman Sachs economists have shifted their timeline for Federal Reserve interest rate cuts, pushing back the expected start date from May to June. This adjustment follows recent pronouncements from central bank officials and the release of January meeting minutes.

The investment bank now predicts four rate cuts throughout 2024, dropping their previous forecast of five, anticipating interest rate cuts in June, July, September, and December. Despite the revised timeline, the terminal rate of 3.25%-3.5% remains unchanged, according to a note authored by economists including Jan Hatzius, as Bloomberg first reported.

Goldman Sachs, as CryptoGlobe reported, has recently revised S&P 500 target upwards for the second time in 2024, signaling Wall Street’s growing confidence in earnings potential. Its optimism was driven by increased profit estimates.

❖ Goldman Sachs raises S&P 500 price target on earnings strength

Goldman Sachs equity strategists raised their year-end S&P 500 index target to 5200 from 5100, indicating a 4% potential upside from current levels.

This adjustment reflects raised profit estimates with the new…

— *Walter Bloomberg (@DeItaone) February 17, 2024

This week, three Fed officials reiterated the central bank’s commitment to lowering rates in 2024, albeit not in the immediate future. As recently as mid-January, investors and some economists anticipated the Fed to begin easing rates at the upcoming March meeting.

Goldman Sachs’ analysts pointed to robust economic data that has seen officials become less worried about the negative effects of prolonged high interest rates, while suggesting that the most significant risk associated with high interest rates are behind us, rendering interest rate cuts less urgent.

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On top of that, the analysts suggest Federal Reserve officials are seeking more concrete evidence that inflation is on track to reach the 2% target before implementing cuts, in a stance that’s partly driven by concerns that a stronger economy could hinder further progress on inflation reduction.

The market has seemingly started pricing in this analysis, with the stock market’s benchmark index, the S&P 500, moving up 4.7% over the past month and over 1.6% on Thursday on NVIDIA’s strong earnings.

Bitcoin, meanwhile, has moved up over 28% in the past month but dropped 1.8% over the past week as investors turned to equities. Gold, the precious metal Bitcoin is often compared to a digital version of, traded sideways for the past month.

The flagship cryptocurrency could notably be on the cusp of unlocking a massive $500 billion opportunity in the rapidly expanding decentralized finance (DeFi) sector, according to a partner with leading cryptocurrency hedge fund Pantera Capital.
Bitcoin holdings on Nasdaq-listed cryptocurrency exchange Coinbase, the largest crypto trading platform in the United States, have fallen to their lowest level since 2017 as BTC whales started withdrawing funds into self-custody.

Featured image via Unsplash.