Goldman Sachs has adjusted its Fed rate cut outlook, sees a higher risk of deeper easing if recession hits.
Earlier:
Goldman Sachs expects the Federal Reserve to begin a series of interest rate cuts in June—earlier than its previous forecast of July—as part of a precautionary easing cycle. Under its base case, which assumes the U.S. avoids a recession, the Fed would deliver three consecutive 25 basis point cuts, bringing the federal funds rate down to a range of 3.5%–3.75%.
However, if the economy does fall into recession, Goldman anticipates a more aggressive policy response, with the Fed slashing rates by approximately 200 basis points over the next year.
Factoring in the increased likelihood of a recession, the bank’s weighted forecast now calls for a total of 130 basis points in rate cuts for 2025—up from 105 basis points previously. That outlook is now broadly aligned with current market expectations as of Friday’s close.
This article was written by Eamonn Sheridan at www.forexlive.com.