Goldman Sachs has recently revised its forecast on the Federal Reserve’s rate cuts trajectory, now predicting three rate reductions by the end of this year. The revision marks a significant change from their initial prediction, which suggested the first rate cut would not occur until December 2024.
According to TheStreet, the investment firm now anticipates the first interest rate reduction to happen as soon as June, aligning more closely with the broader market consensus. Initially, Goldman Sachs had forecasted three rate cuts by the end of the year, with the first one scheduled for the third quarter of 2024. However, they later adjusted their forecast to include four cuts, with the first one expected in May.
The latest estimate from Goldman Sachs suggests that there will be three rate decreases in 2024, with the first one set for June. Additionally, the firm projects four cuts in 2025 and one in 2026, with terminal interest rates ranging between 3.25% and 3.5%.
The shift in Goldman Sachs’ forecast comes amidst changing market expectations regarding the timing of the Federal Reserve’s rate cuts. While earlier predictions pointed to a rate cut as soon as the March meeting, economic data and statements from Fed officials have since tempered these expectations. As a result, the anticipated rate reduction in June has been pushed back to September or later, impacting the outlook for cryptocurrencies and other markets.
Federal Reserve Chairman Jerome Powell has emphasized that the US economy is not heading towards a recession, but uncertainties surrounding inflation and economic growth make it challenging to predict when the central bank might adjust interest rates. Historically, investors closely follow the Fed’s rate decisions, with government securities typically losing value when rates are lowered, potentially leading to increased interest in cryptocurrency assets.
Despite the delay in anticipated rate cuts by the Fed, the cryptocurrency market’s growth trajectory may remain unaffected in the near term, as a strong economy typically fuels demand for riskier investments. While the postponement of rate reductions could temporarily impact the volatility of cryptocurrency markets, the overall expansion of the sector may continue unabated, driven by investor interest and market dynamics.
In conclusion, Goldman Sachs’ revised outlook on Fed rate cuts underscores the evolving landscape of economic forecasts and market expectations. The delay in anticipated rate reductions by the Federal Reserve may influence investor behavior and asset preferences, but the cryptocurrency market’s resilience and growth potential remain intact amid shifting economic paradigms.
