Investing.com — Goldman Sachs strategists continue to forecast consecutive 25 basis-point rate cuts in December, January, and March, followed by additional reductions in June and September.
However, they note that recent remarks from Federal Reserve officials have increased the likelihood that the Federal Open Market Committee (FOMC) might slow the pace of rate cuts sooner than previously expected, possibly as early as the December or January meetings.
At the New York Times’ DealBook Summit, Fed Chair Jerome Powell emphasized that recent data suggest the central bank can “afford to be a little more cautious” in adjusting policy toward a neutral stance.
Powell highlighted the economy’s strength, noting that since the September FOMC meeting, the labor market has improved, downside risks have diminished, growth has outpaced expectations, and inflation has been “a little higher.”
Other members of the FOMC have echoed the possibility of a more measured approach to rate normalization.
In a speech at the American Institute for Economic Research Monetary Conference, Fed Governor Christopher Waller said that he currently “leans toward supporting a cut” at the December meeting.
However, he acknowledged that the recent inflation reports “have raised concerns that the FOMC should consider holding the policy rate constant” in December and that he would be “supportive of” holding the policy rate steady this month if upcoming data shows that “forecasts of slowing inflation and a moderating but still-solid economy are wrong.”
Similarly, St. Louis Fed President Alberto Musalem, speaking at the Bloomberg and Global Interdependence Center Symposium, said that while further policy easing remains likely, “the time may be approaching to consider slowing the pace of interest rate reductions or pausing” cuts.
San Francisco Fed President Mary Daly, in an interview with Fox Business, remarked that “whether [the next cut] will be in December or sometime later” is a question the FOMC will discuss at its December meeting.