VIEW: Goldman Tweak Fed Call, Now See first Cut In June

Goldman Sachs changed their Fed call overnight, noting that “comments from Fed officials and the minutes to the January FOMC meeting suggest that the first rate cut is unlikely to come as early as our previous forecast of the May meeting.”

• “We have therefore dropped our forecast of a May cut and now expect 4 cuts total in 2024 (vs. 5 previously) in June, July, September, and December, followed by 4 more cuts in 2025 (vs. 3 cuts previously), to the same terminal rate of 3.25-3.50%.”
• FOMC-dated OIS currently shows ~18.5bp of cuts through the June ’24 FOMC meeting, leaning towards, but not fully pricing, a 25bp cut.
• Further out, the first 25bp cut is more than fully discounted come the end of the July ’24 FOMC, with ~79bp of cuts priced over ’24.
• That leaves Goldman’s ’24 cutting view as a little more aggressive than market pricing.
• The median dot in the Fed’s Dec SEP showed 3 cuts in ’24.