(Reuters) – The Federal Reserve is unlikely to raise interest rates between October 31 and November. 1 meeting, Goldman Sachs strategists wrote on Saturday, while also predicting the US central bank would raise its economic growth forecasts when policymakers meet next week.
“In November, we think further labor market rebalancing, better news on inflation and the likely upcoming growth gap in the fourth quarter will convince more participants that the FOMC (Federal Open Market Committee) can forego a final hike this year, as we think it will eventually happen. will do,” the investment bank’s strategists wrote in a report.
However, Goldman strategists wrote that they expect the Fed’s “dot plot,” which reflects policymakers’ interest rate projections and will be updated Wednesday, will show that “a narrow 10-to-9 majority is still looking for an interest rate increase, if only to maintain interest rates. flexibility for now,” they wrote.
As market participants try to gauge the Fed’s monetary policy, some major investors, including JP Morgan Asset Management and Janus Henderson Investors, have said the central bank is likely done with raising rates after the most aggressive monetary tightening cycle. policy in decades.
According to CME Group’s FedWatch Tool, futures tied to the Fed’s daily interest rate factored in a 98% chance that the central bank would leave rates unchanged at the end of the September 19-20 meeting. The odds for the policy rate, which is currently between 5.25% and 5.50%, remain unchanged between October 31 and November. The 1 meeting was about 72% on Saturday, CME data showed.
There could be “gradual” rate cuts next year if inflation continues to cool, Goldman strategists added.
They also said the central bank could raise its estimates for U.S. growth in 2023 from 1% to 2.1% when policymakers update their economic projections on Wednesday, reflecting the economy’s resilience.
Goldman strategists also expect the Fed to cut its 2023 unemployment rate estimate by two-tenths of a percentage point to 3.9%, and cut its core inflation estimate by four-tenths of a percentage point to 3.5%.
(Reporting by Ira Iosebashvili; Editing by Paul Simao)