Fed could cut interest rates 'earlier and faster' than expected, Goldman says
Economist Peter Morici reacts to the Fed signaling that it could cut interest rates three times in 2024, on 'Varney & Co.'
The Federal Reserve could begin cutting interest rates earlier than previously expected after policymakers made a dovish pivot during their final meeting of the year on Wednesday, according to Goldman Sachs strategists.
The analysts, led by Jan Hatzius, now expect the central bank to trim the benchmark rate by 25 basis points during its meetings in March, May and June. The bank had previously only expected two cuts beginning in the third quarter of 2024.
«In light of the faster return to target, we now expect the FOMC to cut earlier and faster,» they wrote in an analyst note on Wednesday.
FED'S FIGHT AGAINST INFLATION IS WEIGHING ON MIDDLE-CLASS AMERICANS
The major shift comes after the Fed voted for the third month straight to hold interest rates steady at a range of 5.25% to 5.5%, the highest level in 22 years. But central bankers also hinted that their nearly two-year fight against inflation was coming to an end as they forecast a series of rate cuts in 2024.
In a statement released after the meeting, the policy-setting Federal Open Market Committee acknowledged that «inflation has eased over the past year but remains elevated» and said it would watch the economy to see whether «any» additional rate hikes are needed — a change that indicates many officials believe further tightening is not necessary at this point.
US ECONOMY ADDS 199,000 JOBS IN NOVEMBER, UNEMPLOYMENT RATE UNEXPECTEDLY FALLS
«We added the word ‘any’ as an acknowledgment that we are likely at, or near, the peak rate for this cycle,» Fed Chair Jerome Powell told reporters at the post-meeting press conference in Washington, D.C.
Read more on foxbusiness.com
