Goldman Sachs Predicts Federal Reserve Rate Cuts

(Reuters) – Goldman Sachs indicated on Wednesday that it anticipates the U.S. Federal Reserve will implement consecutive 25-basis-point (bps) interest rate cuts from November 2024 through June 2025, resulting in a terminal rate range of 3.25-3.5%.

Last month, the U.S. central bank reduced the overnight rate by half a percentage point, expressing increased confidence that inflation will continue to decrease to its annual target of 2%.

The overnight rate currently stands at 4.75%-5.00%, which influences the interest rates banks pay each other and impacts consumer rates.

Market predictions suggest a 94.1% likelihood of a 25 bps cut at the Fed's next meeting, while there is only a 5.9% chance that the bank will maintain its current rates, as per CME's Fedwatch Tool.

Goldman Sachs also forecasts that the European Central Bank will lower interest rates by 25 bps during its monetary policy meeting on Thursday, with expectations of successive 25-bps reductions until the policy rate reaches 2% by June 2025.