- The BofA speculates the Fed will cut interest fees by 25 bps in the coming week.
- Citibank and Goldman Sachs foresee several rate reductions this year.
- The Fed aims to manage economic uncertainties while tackling inflation.
Bank of America expects the Federal Reserve to reduce additional pricing costs by 25 basis points in the coming week. This anticipated velocity cut would be the first in a series of reductions after the longest pause following a frame hike cycle in the Fed’s history. BofA sees more quarter-point cuts over the next five meetings as the Fed takes a cautious approach to ongoing money uncertainties.
Economic Data Points to Modest Easing
The current economic data supports the expectation of a 25bps rate cut. BofA remains firm in its prospect despite speculation about a larger 50bps reduction. The bank believes the Federal Reserve will aim to balance financial challenges while maintaining a positive perspective for the future.
Citibank has also revised its hypotheses, now predicting a 0.25 percentage point rate cut instead of the earlier expected 0.5 % points. This adjustment reflects ongoing inflation pressures, especially in housing and essential services. The Federal Reserve’s decision will likely focus on these inflationary issues as it considers the best path forward.
Goldman Sachs’ View on Rate Cuts and Inflation
Goldman Sachs predicts the Federal Reserve could implement two or three price slashes in 2024. This view aligns with predictions from other financial institutions like Morgan Stanley and UBS Global Research. However, it is uncertain if these firms will update their forecasts based on new economic data.
Goldman Sachs has also adjusted its inflation expectations. The firm now forecasts a 0.17% month-over-month boost in the August Personal Consumption Expenditures price rate. This revision demonstrates continuing cost pressures that persist to challenge the Federal Reserve’s monetary policy decisions.
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Goldman Sachs maintains its expectation of three 25-bps rate cuts at the remaining Federal Open Market Committee meetings in 2024. This cautious approach underscores the delicate balance the Fed must maintain while navigating the current economic landscape.
Impact on Financial Markets
The expected rate cuts are likely to influence the broader accounting industry. Asset management firm Schroders suggests central banks may not ease policies as much as financial sectors expect. They believe policymakers will likely be cautious to avoid triggering another wave of inflation, which could destabilise the economy.
Meanwhile, Goldman Sachs, led by CEO David Solomon, is adjusting its career focus. The bank is reducing its retail operations, including selling loans to small businesses. the organisations also plans to exit a credit card partnership with General Motors. These strategic changes, part of a broader adaptation that started in late 2022, are expected to result in a $400 million pre-tax impact primarily affecting the bank’s revenues.
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