against the current expectations of the market, which provides it with a near-certainty that at least two rate cuts from the Fed before the end of the year, Goldman Sachs (NYSE:GS) warns of the risk that the Fed does drop the end, not its rates this year.
The chairman of the Fed Jerome Powell said last week that the central bank will “act as needed to support the expansion,” which the market interpreted as a signal announcing the rate down to the horizon.
However, Goldman Sachs believes from his side that no rate increase will not take place this year :
“We still expect the FOMC to keep the funds rate unchanged for the rest of the year,” said Jan Hatzius, chief economist of the bank, in a note published Monday.
“In our opinion, the remarks of Powell, were not a index box of a rate cut to come, but simply to ensure that the FOMC is well aware of the risks related to the commercial war.
Recall that according to the barometer of the Fed funds rate Investing.com the market expects currently a probability of 83% to see the Fed lower its rates at the meeting of the month of July.
Note that if the Fed did not actually intend to lower its rates this year, as the think Goldman Sachs, this should be reflected more clearly at the Fed meeting on Wednesday.
In this case, it will be clear to a surprisingly hawkish, and we can expect an upward impact on the Dollar, but probably to a decrease in the stock.
If, on the contrary, the Fed confirms more or less explicitly, a rate increase for the next month, this is the downside which should take precedence over the Dollar and the rise in the shares. However, this scenario is currently being widely anticipated, the impact could prove limited.