Goldman Sachs sceptical of 'insurance' US rate cuts from Fed

Dhwani Mehta FXStreet

In the latest client note released on Sunday, the Goldman Sachs economists maintained their view that the Fed would refrain from slashing rates until there is evidence of significant deterioration in business and consumer activities.

Key Quotes:

“A surprise escalation in trade tensions between Washington and Beijing since May, together with stubbornly low inflation, have spurred bets among traders the U.S. central bank may lower key lending rates by 0.75 percentage points by year-end.

However, we think the hurdle for such cuts is likely to be higher than widely believed.

Another assumption for insurance rate-cuts is that Fed officials could reserve the moves once the risk abates.

However, the greater political scrutiny of Fed hikes now—especially with a presidential election approaching—could make this harder to do in 2020, so that overly hasty insurance cuts now might increase the risk that the funds rate gets stuck at too low a level if the economy remains resilient."

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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