Goldman Sachs sees two more 25bp cuts this year after Powell’s remarks By Investing.com

Investing.com — Following Federal Reserve Chairman Jerome Powell’s latest speech, Goldman Sachs strategists reiterated their expectations for two more 25 basis point (bp) interest rate cuts in 2024 from the central bank.

During an event hosted by the National Association of Business Economists this afternoon, Fed Chairman Jerome Powell emphasized that the committee does not feel it is “in a rush to cut rates quickly” and that the process of lowering the federal funds rate will ” play”. out in time.”

Powell also referred to September’s Summary of Economic Projections, saying the “baseline” would involve “two more cuts, it wouldn’t mean 50 more years.” However, he clarified that the pace of tapering will ultimately depend on the data and the FOMC “will do the right thing in terms of the speed at which we move.”

The central bank governor described the overall economy as “strong”, pointing to the recent annual update of the national accounts. He pointed out that the upward revision of gross domestic income (GDI) “removes a downside risk to the economy” and the upward revisions to the savings rate also eased concerns about “a possible downside risk as the level consumer spending to be unsustainable. “

While acknowledging that activity data has been less predictive of recessions than labor market data, Powell emphasized that “there is nothing I can point to in the economy that suggests a downturn is more likely than it is in any moment”.

On the labor market, Powell’s tone was somewhat more cautious. He explained that the increase in the unemployment rate projection in the September SEP is related to the idea that “the level of job creation may not be quite at the level needed to keep unemployment constant, given the assumptions about supply.”

He also noted that “the level of wage job creation has fallen quite significantly,” drawing attention to downward revisions to wage growth in the QCEW data.

Powell also reiterated the Fed’s position that he does not “think we need to see further cooling in labor market conditions to achieve 2% inflation.”

Goldman Sachs strategists said they saw Powell’s remarks “consistent with our forecast for 25bp cuts in November and December.”

“We continue to see the choice between 25bp and 50bp in November as a close call,” they added.

The Fed began its policy shift last month with a 50bp rate cut, marking the first cut of 2020.