Amid four-decade high inflation, the Federal Reserve is widely expected to raise its interest rate by at least 75 basis points today, for the third consecutive time. And now, Goldman Sachs strategists say that the Fed won’t cut rates until 2024. 

                By                    Yaёl Bizouati-Kennedy

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But some analysts have a different view. Hayden Hughes, co-founder and CEO of Alpha Impact, said: “With all due respect to my friends at Goldman Sachs, bankers are notoriously inaccurate at predicting what the Fed will do. The reason is simple: The Fed makes data-driven decisions based on the prevailing economic indicators in the weeks leading up to their meetings.”

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“Even during this period, rates were lowered and increased through the years. The market is certainly pricing sustained and continued increases in interest rates through the rest of 2023, but anything beyond that is a guessing game,” he noted.

Investors are also awaiting the Fed’s quarterly projections for the economy, including unemployment and inflation-indicators of the direction of potential future hikes.

Goldman Sachs added that it expects 50 bps hikes in November and December, taking the funds rate to 4-4.25% at year-end, and added  that the new economic projections “are likely to show GDP [gross domestic product] growth more materially below potential this year and next than in June, a slightly larger increase in the unemployment rate in the years ahead, and a bit more inflation this year and next.”

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He added, however, that “inflation is out of control, and it is not enough to tame it. So I call this death by a thousand cuts with future rate hikes on the way.

“What does this mean for the consumer? Stalled equity and crypto markets, higher costs of credit, and until inflation is under control, more expensive food and energy. So cut cut cut for another six months? Who knows?”

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