On Friday, Goldman Sachs (NYSE:GS) maintained its forecast that the Federal Reserve will implement a 25 basis point easing in interest rates next week, with additional 25 basis point cuts anticipated for November and December. This would result in a total reduction of 75 basis points by the end of the year.
The firm's outlook is based on the current state of the U.S. labor market and inflation trends. According to their analysis, the labor market is experiencing a slowdown but is not heading towards a recession. This assessment was outlined in a note titled "Controlled Descent," indicating a gradual and manageable deceleration in employment growth.
Inflation expectations have also been adjusted, with Goldman Sachs lowering its forecast for the August Personal Consumption Expenditures (PCE) inflation rate to a modest 0.17% month-over-month pace. This revision was detailed in a note called "Lowering August Core PCE Tracking to +0.17%."
The anticipated rate cuts are seen as a response to these economic indicators. The firm continues to expect the Federal Reserve to make three rate cuts of 25 basis points each at the remaining Federal Open Market Committee (FOMC) meetings of 2024.
Goldman Sachs also provided a forecast for the terminal funds rate, which is the interest rate at which the Federal Reserve ends its cutting cycle. The firm's expectation remains set at a range of 3.25% to 3.5%, acknowledging that there are risks that could push the rate in either direction.
In other recent news, analysts from Cit and Wells Fargo (NYSE:WFC) have forecasted a series of rate cuts by the Federal Reserve. Cit anticipates a total of 125 basis points reduction by year-end, starting with a 25 basis points cut in the upcoming period, followed by 50 basis points cuts later in the year.
This prediction is based on labor market data and inflation measures. Wells Fargo, on the other hand, anticipates a 25 basis points reduction following the release of the latest Consumer Price Index data.
Citi and Capitol Economics also predict a cautious approach by the Federal Reserve due to the recent inflation data. Meanwhile, Evercore ISI suggests potential rate cuts following remarks from the New York Federal Reserve President John Williams.
In the restaurant industry, Barclays (LON:BARC) reported a 5.1% year-over-year increase in the average hourly wage, marking a more stable outlook.
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