Goldman Sachs doesn't expect Fed to raise interest rates

Goldman Sachs (NYSE:GS) believes that the Federal Reserve System (FRS) will not raise interest rates after its May meeting, according to Business Insider.

The FRS' March meeting minutes, published on Wednesday, showed that central bank officials are concerned about a moderate recession in the country as a result of the banking crisis. Goldman Sachs' chief economist, Jan Hatzius, sees a 35% chance of a recession in the US in the next 12 months.

Goldman Sachs no longer expects a rate hike in June due to slowing inflation, weakening labor markets, and the FRS's concerns about the banking crisis. "We still expect a rate hike in May to 5-5.25%," wrote the GS team led by Chief Economist Jan Hatzius.

Thus, the FRS will make its final rate hike of 25 basis points at its May 3 meeting and then keep it at this level until the second quarter of next year.

According to data on US consumer inflation released on Wednesday, as well as the FRS meeting minutes in March, investors can now assume that the US central bank has likely begun winding down its campaign to tighten monetary policy.

On Wednesday, the consumer price index (CPI) showed a decline to 5% in March, while the so-called inflation in housing prices, which mainly measures the cost of rent, fell from 8.3% to 5.3%.

Such a decline in the level of housing inflation is encouraging, and March reports on the CPI index as a whole correspond to the expectations of the bank's team of economists. And the FRS meeting minutes in March showed that policymakers expect banking disruptions last month to lead the economy to a soft recession by the end of 2023.