No More Interest Rate Hike In November: Goldman Sachs

Goldman Sachs, one of the world’s leading investment banks, has recently made a bold prediction that there might be no interest rate hike in November.

Rationale for Delayed Rate Hike

In a recent report, Goldman Sachs’ strategists outlined that several key factors have contributed to the prediction of a delayed interest rate hike. They highlighted that the labor market needs to be rebalanced more before the Federal Reserve considers raising interest rates again. This suggests that the Central Bank may be waiting for persistent increases in employment data before tightening monetary policy.

Additionally, the strategists point to promising developments in inflation, which have been a major concern in recent months. Goldman Sachs anticipates that improved inflation data may ease the pressure for an immediate rate hike.

The strategists also mention an anticipated slowdown in economic growth in the fourth quarter. They highlighted that such a growth deceleration could lead the Federal Reserve to delay any interest rate increases, as it would prefer to gauge the economy’s resilience before taking action.

Looking ahead to next year, Goldman Sachs’ strategists suggest the possibility of gradual rate cuts if inflation continues to cool. They also anticipate the Federal Reserve to raise its estimates for 2023 U.S. growth to 2.1% from 1%, reflecting the economy’s resilience.

Probability on Rate Hikes

Meanwhile, market participants are closely monitoring the Fed’s moves and sentiments, especially given the recent history of monetary policy tightening. 

Some major investors, including J.P. Morgan Asset Management and Janus Henderson Investors, have expressed the view that the Central Bank may have concluded its rate hike cycle, marking the end of one of the most aggressive monetary policy tightening phases in decades.

Futures tied to the Fed’s benchmark overnight interest rate indicate that market participants are overwhelmingly expecting no change in rates at the September 19-20 meeting. According to CME Group’s FedWatch Tool, the probability of rates remaining steady at the October 31-November 1 meeting stands at approximately 72%. 

These odds reflect market sentiments aligned with a unanimous vote by the Fed to keep interest rates steady.