Goldman Sachs has stated that current wagers on the Federal Reserve raising interest rates are still too aggressive, given that inflation in the world's largest economy is cooling. In a note to clients, the investment bank's chief economist, Jan Hatzius, wrote that a rate hike at the Fed's September meeting has become "extremely unlikely" due to declining retail sales data, disappointing employment figures, and slowing inflation.
Hatzius wrote in the report released on Sunday: "Based on our baseline economic forecast, the inflation situation is more likely to improve further in the upcoming period rather than worsen again. We still believe the market's pricing of the federal funds rate is too hawkish." Data shows that traders have pushed back their expectations for the next 25-basis-point rate hike by the Fed to January, whereas a week ago they were certain it would happen in December. Goldman Sachs noted that while the intensity of hawkish pricing has weakened, there is still room for it to decline further.
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