Goldman Sachs said the Fed would not lower rates this year


Goldman Sachs warns that a growing consensus on the fact that the Federal Reserve will soon reduce its rates is wrong.

President Jerome Powell said last week that the Fed would "act appropriately to support the expansion," which the market has interpreted as a sign of falling rates on the horizon.

"Although this is a tight decision, we still expect the FOMC to keep the fund rate unchanged for the rest of the year," said Monday Hat Hatius, the bank 's chief economist. "In our opinion, this was not a significant indication of a future reduction, but was simply to reassure the FOMC about the risks of the trade war."

"A presidential address exclusively devoted to long-term issues, while the growing concern over trade policy might otherwise have seemed" out of touch "with some market players," he added.

Although Goldman does not buy it, traders are increasingly relying on easing monetary policy to offset the potential damage caused by the trade war. The federal funds futures market points to almost a 70% chance of a rate cut in July and about 60% probabilities of three rate cuts this year, according to the FedWatch CME tool.

"We expect Fed officials to be very careful not to deliver an unconditional warmongering message but to continue to insist that they will react to the shocks needed to fulfill their mandate." said Hatzius.


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