Goldman Sachs predicts first of four US rate cuts to occur in June

Goldman Sachs economists have recently updated their predictions for when the Federal Reserve will cut interest rates. Initially, they expected five rate cuts in 2024 but have now adjusted this to four, with the first cut anticipated in June, not sooner. This change comes after considering comments from Federal Reserve officials and the latest policy meeting minutes.

The Federal Reserve officials, including Gov. Christopher Waller and Philadelphia Fed President Patrick Harker, have hinted that there’s no immediate need to lower rates. They want to see more progress on inflation reduction before taking any steps. Their comments indicate that the Fed is in no rush to cut rates, especially with only a few inflation reports available before their next meeting in May.

Feds Focused on Inflation

Fed officials are now focusing on two main changes in their approach. First, they’ve noticed strong economic data, which lessens their worry about the negative impacts of high rates lasting too long. They believe the major risks from past rate hikes are mostly behind us, reducing the urgency for rate cuts. 

Secondly, they want clearer evidence that inflation is moving closer to their 2% target before considering rate reductions. This marks a shift from the previous stance that suggested rate cuts could happen “well before” inflation reaches 2%.

Even though recent inflation data for January was higher than expected, Goldman Sachs views it as an outlier. They predict that core inflation will decrease to 2.5% by the May Federal Open Market Committee meeting and drop to 2.2% by June.

Four Rate Cuts in H2 2024

With these predictions, Goldman Sachs anticipates rate cuts in June, July, September, and December of 2024 and an additional four cuts in 2025, adjusting their expectations from three to four. This suggests they see no change in their view of the terminal rate between 3.25% and 3.5%. Similarly, UBS has also revised its forecast, expecting a total of 75 basis points in rate cuts this year, beginning in June instead of May.

Market predictions align somewhat with these views, showing a 20% chance of a rate cut in May and a 70% chance in June, according to futures-market pricing. This cautious approach by the Federal Reserve indicates they are prioritizing the fight against inflation and ensuring economic stability before making any moves to lower rates.

Bitcoin May Skyrocket To $100,000

If the potential rate cuts come after Bitcoin Halving, the year 2024 can end on an extremely bullish note for Bitcoin. As the halving is expected to boost the Bitcoin price above the $69,000 all-time high, rate cuts after April will fuel and propel the Bitcoin price to a new high. 

Amidst the ongoing recovery, the BTC price trades above the $50,000 mark and a mere 26% away from its all-time high. Hence, despite the potential delay in the rate cuts, the upcoming months for Bitcoin and the crypto industry are filled with hopes.