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| Goldman Sachs Forecasts Two Additional Rate Hikes by the Fed in May and June |
According to economists at Goldman Sachs, the US Federal Reserve (Fed) is expected to implement additional 25 basis points rate hikes in May and June. The call came after the FOMC decided to raise the funds rate by 25bp to 4.75-5%, which was contrary to the Goldman Sachs expectation of a pause. Despite the increase, the Fed projected a weak economic outlook for the rest of 2023 and a more cautious path for the funds rate than previously indicated.
Goldman Sachs has not changed its forecast for the peak funds rate, which remains at 5.25-5.5%. The investment bank's weighted-average path for the funds rate is also above market pricing. While the FOMC's forecast for the funds rate is 5-5.25%, Goldman Sachs expects it to be 25bp higher.
The Fed's decision to raise the funds rate, along with its more cautious outlook, reflects concerns over the recent banking turmoil. Goldman Sachs expects the Fed to continue to take a cautious approach to rate hikes in light of these concerns. However, with inflationary pressures building, the Fed may need to take further action to prevent the economy from overheating. Investors will be watching closely to see how the Fed balances these competing concerns in the coming months.
