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Goldman Sachs slashes odds of a March Fed hike to lower than 5% vs. 10% earlier

Within the view of the analysts at Goldman Sachs, the FOMC January assertion and Powell’s presser each turned out to be dovish. Therefore, calling for a downward revision to their expectations for additional charge hikes this yr.

Key Quotes:

“Chairman Powell s press convention positioned the affected person wait-and-see strategy as the suitable response to elevated draw back dangers from development overseas, weaker survey knowledge, and tighter monetary situations.

 Chairman Powell acknowledged that the size of the ‘affected person interval’ would rely totally on incoming knowledge, and in addition acknowledged that the coverage stance was ‘applicable’ right now. with the coverage charge now within the vary of the Committee’s estimates of impartial.

Powell s feedback on the stability sheet appeared to modestly enhance the chances of an eventual transfer to a slower tempo of normalization. 

We considered each the January assertion and press convention as dovish and have decreased our subjective odds of a March hike to lower than 5% (from 10% beforehand) and our Q2 hike likelihood to 25% (from 55% beforehand). This takes our probability-weighted forecast for the funds charge in 2019 from 1.1 web hikes to zero.7 (and our modal forecast from 2 hikes to 1).” 

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