Goldman Sachs revised its U.S. interest rate outlook citing “stress in the banking system.” The global investment bank no longer expects the Federal Reserve to raise interest rates at the March Federal Open Market Committee (FOMC) meeting after the central bank announced measures to bail out depositors at the failed Silicon Valley Bank and Signature Bank.
Goldman Sachs revised its rate hike forecast
Global investment bank Goldman Sachs has revised its rate hike forecast for the Federal Open Market Committee (FOMC) meeting in March. In a note to clients on Sunday, the bank’s chief economist Jan Hatzius and other economists detailed.
Given the stress in the banking system, we no longer expect the FOMC to raise rates at its next meeting on March 22.
Last month, the FOMC raised the Federal Funds rate by 25 basis points to a target range of 4.5% to 4.75%, the highest level since October 2007.
Goldman revised its forecast shortly after the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC)announced a bailoutfor depositors of two failed banks. Regulators closed Silicon Valley Bank on Friday and Signature Bank on Sunday. In addition, the Federal Reservesaidday to provide additional funding to eligible depository institutions
that the Treasury Department designated the failed Silicon Valley Bank and Signature Bank as systemic risk, and that the Federal Reserve Board has subsequently established the Bank Term Funding to Assist Financial Institutions Affected by the Market Turmoil program, a Goldman Sachs economist described the new program as follows.
While not comparable to the FDIC’s guarantee of uninsured accounts implemented in 2008, both programs appear to enhance depositor confidence.
Economists further noted that they expect the Fed to raise rates by 25 basis points in May, June, and July, with a final rate forecast of 5.25% to 5.5%.
Image Credit:: Shutterstock, Pixabay, Wiki Commons.