Goldman Sachs forecasts Fed to start cutting interest rates in March 2025
Date
12/30/2024 12:59:52 AM
(MENAFN) Goldman Sachs forecasts that the Federal Reserve will begin cutting interest rates in March 2025, with an initial reduction of 25 basis points. According to the bank, this move will likely be followed by two additional rate cuts of the same magnitude in June and September. In a recent note, the bank stated that these adjustments are expected to bring the federal funds rate to a range of 3.5 percent to 3.75 percent by the end of September, reflecting a gradual approach to easing monetary policy.
The outlook for U.S. monetary policy remains uncertain following the Federal Reserve’s December meeting, which sparked notable concern in Wall Street markets. The Fed’s statement indicated plans for two additional rate cuts in 2025, fueling speculation about the exact timing and scale of the adjustments. Goldman Sachs also projects that the Federal Reserve will slow the pace of its balance sheet reduction in January 2025, with a complete halt anticipated by the second quarter.
In terms of economic growth, Goldman Sachs expects real GDP in the United States to expand by 2.4 percent year-over-year in 2025. This growth will be driven by robust real income increases and more accommodating financial conditions. Inflation, as measured by core personal consumption expenditure (PCE), is forecast to decline to 2.4 percent by the end of 2025, aided by slowing housing inflation and reduced wage pressures. However, tariffs are likely to exert a modest upward influence on inflation.
The labor market is expected to remain resilient, with the U.S. unemployment rate gradually decreasing to 4.0 percent by the end of 2025. This projection underscores the continued strength of the job market despite broader economic changes. Goldman Sachs suggests that the combination of easing monetary policy, declining inflation, and stable employment levels will create a favorable environment for sustained economic activity.
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