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  • 1/7/2025
Goldman Sachs has significantly revised its forecast for Federal Reserve interest rate cuts, now anticipating the first cut in September, not December.
#FedRateCuts #GoldmanSachs #TariffImpact

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00:00Goldman Sachs has significantly revised its forecast for Federal Reserve interest rate
00:04cuts, now anticipating the first cut in September, not December. The influential investment bank
00:10projects 325 basis point cuts in September, October, and December, followed by two more
00:16in 2026, bringing the Fed funds rate down to 3.0% to 3.25%. This accelerated timeline is
00:24primarily driven by Goldman Sachs' belief that the inflationary impact of Trump's tariffs will
00:28be less significant and lasting than initially feared. They note early evidence suggests smaller
00:34tariff effects and stronger disinflationary forces at play. Recent comments from some Fed officials
00:40also suggest a willingness to consider a September cut if upcoming inflation reports are not excessively
00:45high, even if tariffs are a contributing factor. Falling inflation expectations among households,
00:52coupled with emerging signs of a weakening labor market, are also making it easier for the Fed
00:56to consider rate reductions. This new forecast comes as Fed Chair Jerome Powell continues to face
01:02pressure from President Trump, who advocates for interest rates as low as 1%. The dollar index has
01:08already fallen to a three-year low, and the two-year Treasury yield, highly sensitive to monetary policy,
01:14has dipped to near a two-month low, as traders increase their bets on aggressive Fed rate cuts.
01:18Money Explainers
01:20Money Explainers

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