In a report published by Goldman Sachs strategists, it was predicted that the US Federal Reserve is unlikely to raise interest rates at its October 31-November 1 meeting.
Strategists also predicted that when policymakers convene next week, the Fed will increase its economic growth forecasts.
The report suggests that rebalancing in the labor market, positive inflation data and the expected growth gap in the fourth quarter will persuade more market participants that the Federal Open Market Committee (FOMC) will not raise interest rates this year.
However, Goldman’s strategists anticipate a narrow 9-to-10 majority on the Fed’s dot plot, which reflects policymakers’ interest rate projections, to indicate that the central bank will still raise rates to maintain flexibility for the time being.
According to CME Group’s FedWatch tool, futures on the Fed’s overnight rate implied a 98% probability that the agency would leave rates unchanged after its September 19-20 meeting.
On Saturday, the likelihood that the policy rate, which is presently between 5.25% and 5.50%, will not be altered at the October 31-November 1 meeting was estimated to be approximately 72%.
Goldman’s strategists also added that “gradual” interest rate cutbacks could be seen next year if inflation continues to cool.
When policymakers revise their economic forecasts on Wednesday, analysts anticipate the Federal Reserve will increase its 2023 U.S. growth projections from 1% to 2% to reflect the economy’s resilience.
In addition, they anticipate that the FED will reduce its unemployment rate projection for 2023 by 0.2 percentage points to 3.9 % and its core inflation projection by 0.4 percentage points to 3.5%.