scratchhere| Goldman Sachs postponed the Federal Reserve's first drop window to September! A picture provides an overview of the latest forecasts of major Wall Street banks

Financial Associated Press, May 25 (editor Xiaoxiang)-with a series of better-than-expected US economic data this week, the Fed's interest rate cut expectations have been spilled.ScratchhereWith more cold water, Goldman Sachs, the Wall Street bank that "predicts always changeable", also hurriedly "tore up" the report again.

Economists at Goldman Sachs on Friday revised their forecasts for the Fed's first window of decline-the latest estimate is that the Fed will not start cutting interest rates until September, up from July. Goldman Sachs believes that because the US economy is still resilient, the case for loosening monetary policy is not valid for the time being.

"We noted earlier this week that comments from Fed officials suggested that a rate cut in July might require not only better inflation data, but also substantial signs of weakness in economic activity or labour market data," Goldman Sachs economists, including Jan Hatzius, wrote in a report.

It is worth mentioning that the last adjustment by the Goldman Sachs team of economistsScratchhereTheir expectations for the path of the Fed's rate cut this year were not far away last month. At that time, they cut their forecast for the number of Fed rate cuts this year from three to two, and thought the two cuts would take place in July and November, respectively.

For now, although it has postponed its forecast for the first window, Goldman Sachs still expects the Fed to cut interest rates twice by the end of 2024-an average of once a quarter or every other meeting. That means that if things go according to its economists' forecasts, the Fed's second rate cut will take place in December.

Judging from the latest data performance of US macro fundamentals, it is not surprising that Goldman will choose to further adjust its forecast of the Fed's interest rate path this week.

As we mentioned in our reports a few days ago, the Fed's latest minutes released on Wednesday "caused a big mess"-although Fed Chairman Colin Powell vowed at a post-meeting press conference that the Fed's next move is unlikely to be to raise interest rates. However, the newly disclosed details of the minutes of the meeting revealed that Powell's statement of the "doves" at that time may have masked the voices of hawkish officials to a large extent.

The hawkish minutes show that "many" Fed officials questioned whether policy was restrictive enough to bring inflation down to target levels, with a number of officials citing a willingness to tighten policy further if necessary.

Market expectations of two Fed rate cuts this year quickly cooled after the Fed minutes were released. With the release of a new series of hot US data on Thursday, the wind began to shift more violently. Data released by S & P Global on the same day showed that the S & P global composite PMI index rose more than 3 points to 54 in May.Scratchhere.4, the highest level since April 2022. The rise in this PMI indicator indicates that overall US economic activity is still accelerating further after entering the middle of the second quarter.

In his latest public appearance this week, David Solomon, Goldman's chief executive, was even more hawkish than the bank's economists, saying he did not expect the Fed to cut interest rates this year.

A picture of the latest forecasts of all the big Wall Street banks

In fact, judging from the latest pricing in the interest rate swap market, even though Goldman Sachs has now postponed the Fed's first cut to September, it is still much earlier than the consensus forecast of traders in the market. So in a sense, investors may not be too surprised if Goldman Sachs revises its forecasts again soon.

The Fed, which is now fully priced, will cut interest rates for the first time in December, based on the pricing of the swap market. The probability of two interest rate cuts throughout the year is less than 30 per cent, significantly less than the probability of about 70 per cent last week.

In addition to Goldman Sachs, Nomura earlier this week also pushed back expectations of the Fed's first cut from July to September, and expects the Fed to cut interest rates only twice this year.

According to a summary of the following table by Nick Timiraos, a well-known journalist known as the "New Federal Reserve News Agency," only a few institutions, such as JPMorgan Chase and Citigroup, still insist on predicting that the Fed will start cutting interest rates in July. Most Wall Street banks' forecasts for the Fed's first drop have been concentrated in September and December.

In terms of the extent of interest rate cuts for the whole year, two institutions, Jefferies and Mizuho, do not expect the Fed to cut interest rates this year, which is expected to be the most hawkish. On the other side, Mitsubishi UFJ Financial Group is the most dovish, predicting that the Fed will cut interest rates by 125 basis points for the whole year, with the first cut in July.