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VIEW: Goldman Push First Cut Call Back To September

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Goldman Sachs have pushed back their call for the Fed’s first rate cut to September from July.

  • They note that “comments from Fed officials suggested that a July cut would likely require not just better inflation numbers but also meaningful signs of softness in the activity or labor market data. After the stronger May PMIs and lower jobless claims, this does not look like the most likely outcome.”
  • “Four additional CPI reports will be available by the September meeting, and if monthly core CPI inflation averages in the high 20s and core PCE in the low 20s, as we expect, then we think most FOMC participants will support a rate cut.”
  • They interpret Chair Powell’s recent comments as “pointing toward a middle-of-the-road path of cutting gradually in recognition of both the considerable cumulative progress made in solving the inflation problem and the realities that inflation is likely to remain noticeably above target this year and the economy is performing well at the current level of interest rates.”
  • For reference, just under 90% odds of a 25bp cut are priced into FOMC-dated OIS through Nov, with ~36bp priced through year end.
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Goldman Sachs have pushed back their call for the Fed’s first rate cut to September from July.

  • They note that “comments from Fed officials suggested that a July cut would likely require not just better inflation numbers but also meaningful signs of softness in the activity or labor market data. After the stronger May PMIs and lower jobless claims, this does not look like the most likely outcome.”
  • “Four additional CPI reports will be available by the September meeting, and if monthly core CPI inflation averages in the high 20s and core PCE in the low 20s, as we expect, then we think most FOMC participants will support a rate cut.”
  • They interpret Chair Powell’s recent comments as “pointing toward a middle-of-the-road path of cutting gradually in recognition of both the considerable cumulative progress made in solving the inflation problem and the realities that inflation is likely to remain noticeably above target this year and the economy is performing well at the current level of interest rates.”
  • For reference, just under 90% odds of a 25bp cut are priced into FOMC-dated OIS through Nov, with ~36bp priced through year end.