Goldman rules out Fed rate cuts before September

The Federal Reserve will not start cutting interest rates before September, according to economists from Goldman Sachs Group Inc.which postponed their forecast for July amid signs that the economy remains too resilient to justify monetary easing.

“This week we noted that comments from Federal Reserve officials suggested that a cut in July would likely require not only better inflation figures but also significant signs of weakness in activity or labor market data.“, wrote the economists in a note, including Jan Hatzius.

Treasuries fell after data showed U.S. durable goods orders rose more than expected in April, further dashing hopes of a rapid easing cycle.

The 10-year bond yield rose one basis point to 4.48%, near the highest level in more than a week. The University of Michigan Consumer Confidence Index will offer investors additional insight into the state of the economy.

Goldman Sachs It was one of the last Wall Street banks betting that the Federal Reserve would begin lowering interest rates in July. Its U-turn comes as the market becomes increasingly convinced that Fed bankers will take a cautious approach to easing monetary policy, given the continued resilience of the US economy.

This week, Nomura Securities He also postponed his cut projections from July to September, saying that “the threshold for rate cuts appears to have increased”. The executive director of Goldman SachsDavid Solomon is even more hawkish than his economists and says he doesn’t expect cuts this year.

The Fed’s first interest rate cut is only fully priced in for December, based on prices in the swaps market. The chances of a second casualty are less than 30%, compared to around 70% last week. At the end of 2023, the Fed was expected to make its first taper in March.

The Treasury bond Americans are headed for their first weekly loss this month. The 10-year yield is just below the 4.50% level that has attracted buyers, and about 60 basis points higher than at the beginning of the year.

Goldman Sachs still expects the Fed to make two cuts in total through 2024, one per quarter, or two meetings away. That means that the second decline would occur in December, according to its economists.

JPMorgan Chase & Co. and Citigroup Inc. They are among the few still forecasting a cut in July.