The economists of Goldman Sachs they no longer expect the Federal Reserve of the United States raise the interest rates in June, according to an analysis note released Wednesday following data showing consumer prices cooled faster than expected in March.
Previously, Goldman Sachs had expected back-to-back rate hikes at the Fed meetings in May and June. The firm’s economists, led by Jan Hatzius, indicated in the note that they continue to expect a rise in May.
Goldman’s latest prediction puts the firm in line with the expectations of other investors. CME rate futures were little changed after the inflation report and continued to suggest that traders mostly expect a 25 basis point rate hike in May, none in June and a significant chance of a cut in July.
Goldman said the latest data from inflation are in line with his expectations and that his new forecast not to raise rates in June is due to signs that banks are holding back on lending after the recent failure of Silicon Valley Bank.
We have ruled out a June rate hike, partly because the scant data available so far seems to confirm that credit is indeed somewhat tight after the banking turmoil, and partly because some Fed officials seem hesitant even about a rise in May,” the economists wrote.
In a separate note to clients, BofA Global Research said March inflation data is likely to keep the US central bank on the path of a May rate hike.
Despite March’s improvement, inflation is still likely too high from the Fed’s perspective,” the BofA economists wrote.
Wednesday’s inflation data adds to recent indicators suggesting that the Federal Reserve’s aggressive drive to rein in inflation, which is at a multi-decade high, is weakening the economy and hurting prices.
Data from the Labor Department showed that the headline and core CPI rose 0.1% and 0.4%, respectively, month-on-month in March. Economists expected a rise of 0.2% and 0.4%, respectively.
In year-on-year terms, the headline CPI rose 5%, versus the 5.2% forecast by economists, while the core, which excludes food and energy price volatility, rose 5.6%, in line with estimates of the consensus.
