Goldman Sachs (GS, Financials) expects the Federal Reserve to implement a 25-basis point rate cut at its upcoming Federal Open Market Committee meeting on Nov. 7, as central bank officials appear more at ease with their dual mandate for employment and inflation.
Following a change in tone since the September jobs data, this expected decline positions the rate decrease as most likely "uncontroversial," according a Goldman investor note.
Goldman Sachs Economic Research found in its analysis that Fed officials have presented a more balanced view of inflation and job growth pressures since September, compared to past years. With Goldman expecting few changes to the FOMC's statement or forward guidance for next sessions, this change should open the path for the rate reduction.
With the CME FedWatch tool showing a 98.1% probability of a 25-point rate drop to a target range of 4.50%-4.75%, market mood fits Goldman's prediction. At 4.75%-5.00%, just 1.9% of market players now forecast the Fed would keep rates constant.
With an eye toward a terminal rate of 3.25%-3.5%, Goldman Sachs forecast that the Fed may follow with four additional rate cuts in the first half of 2025. Goldman did admit, though, that given changing economic circumstances, there is still uncertainty over the speed of declines as well as the final destination.
