FOMC preview: Rate hike is now extremely likely – Goldman Sachs

Analysts at Goldman Sachs offer their insights on what to expect from the FOMC monetary policy meeting scheduled this week on June 13th and 14th, with a rate hike fully priced-in by markets.

Key Points:

Rate increase is now extremely likely

The statement will likely characterize economic activity as picking up but recognize that inflation slowed since earlier this year

The unemployment rate has fallen 0.4pp since the March meeting and our current activity indicator and real GDP estimates signal that above-trend output growth will produce further labor market improvement. But the year-over-year core PCE inflation is now 0.2pp lower than at the March meeting.

The press conference should provide some clarity on whether the next tightening step after June will be balance sheet normalization or a third funds rate hike

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