Goldman Sachs: It is expected that the Federal Reserve will keep interest rates unchanged at its June meeting, and the possibility of a rate hike is low.

Goldman Sachs released a research report pointing out that the most important change in economic data since the last FOMC meeting is the significant rebound in job growth, which has put the labor market on a more stable track. This has shifted the market focus to whether inflation has become severe enough to support a rate hike. However, Goldman Sachs believes that the possibility of a rate hike is low. The bank pointed out that on the one hand, the Federal Reserve usually does not raise rates due to oil price shocks, and on the other hand, the current environment has reduced the probability of oil price shocks triggering self-reinforcing high inflation. Nevertheless, there have been some worrying signs, and if inflation expectations or the breadth of high inflation categories show a significant increase, the possibility of a rate hike will increase. Goldman Sachs believes that at the first meeting in June after the new chairman takes office, the FOMC is likely to keep the federal funds rate unchanged and remove forward guidance hinting at a rate cut. The bank expects the meeting statement to only remove the phrase "the extent and timing of additional adjustments" regarding adjustments to the federal funds rate. The bank expects the median of the rate dot plot to show that the federal funds rate will remain unchanged until 2026, with three members predicting a rate hike later this year. However, the bank expects the median of the dot plot to still show two eventual rate cuts, most likely in 2027 and 2028. Some neutral rate points may move up, but the median is unlikely to rise significantly. The bank assumes that the new chairman, Powell, will not submit a dot plot, as he has criticized forward guidance in the past.