Goldman Sachs, citing a steepening global economic slowdown and a US economy that could be much closer to steady levels than previously thought, is slashing their rate hike forecast for 2019 from the US Federal Reserve.
A rate hike in Q1 quite unlikely.
Our estimates for the probability of hikes in subsequent quarters have also come down to 55% for Q2 (from 65%) and 45% in Q3 (from 55%).
We still view the probability of a hike in Q4 as 55%, i.e. slightly more likely than not.
We have also slightly raised our probability of rate cuts to 10% in Q3 (from 5%).
These probabilities generate an expected value of 1.2 net hikes in 2019, compared with market pricing of zero hikes.
A slowdown is already evident in the numbers.
The impulses from fiscal policy and financial conditions are turning more negative.
Unemployment is already ¾pp below our 4½% estimate of the rate consistent with a 2% inflation rate in the medium term … other measures of labor market slack confirm the message of labor market tightness. Given the close correlation between labor market overheating and subsequent recession, Fed officials will want to see a significant slowdown in growth. This means that if financial conditions reverse too much of their recent tightening, Fed officials would likely turn more hawkish to keep growth from rebounding too much.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.