(Reuters) – The Federal Reserve is likely to raise interest rates on Oct. 31-Nov. 1 meeting, Goldman Sachs strategists wrote on Saturday, adding that US central bank policymakers will raise their economic growth forecast when they meet next week.
“In November, we think that more labor market stabilization, better news on inflation, and the upcoming Q4 growth hole will convince many participants that the FOMC (Federal Open Market Committee) may leave the last hike this year, finally, we think. Investment bank strategists wrote in their report.
Goldman strategists, however, wrote that they expect the Fed’s “dots plot” to reflect policymakers’ interest rate forecasts and improve on Wednesday, “Narrow 10-9 majority still lead in one more hike, if only to maintain. Volatility for now.”
As market participants try to gauge the direction of the Fed’s monetary policy, some big investors, including JP Morgan Asset Management and Janus Henderson Investors, said the central bank had hiked the pace following its most aggressive monetary policy tightening cycle in decades.
Futures tied to the Fed’s benchmark pegged at a 98% chance the central bank will leave rates at the end of September 19-20, according to CME Group’s FedWatch tool. The odds for guidance, currently in the 5.25%-5.50% range, will remain unchanged on Oct. 31-Nov. Saturday’s 1 rally stalled at roughly 72%, CME data showed.
A “gradual” rate cut is likely next year if inflation continues to slow, Goldman strategists added.
As policymakers updated their economic forecasts on Wednesday, they said the central bank may raise its 2023 US growth estimate to 2.1% from 1%, reflecting the economy’s resilience.
Goldman strategists expect the Fed to cut the 2023 unemployment rate by two-tenths of a percentage point to 3.9% and core inflation by four-tenths of a percentage point to 3.5%.
(Reporting by Ira Isebashvili; Editing by Paul Simao)
