Goldman Sachs Foresees Five Federal Rate Cuts in 2024 Amid Disinflation

• Goldman Sachs predicts the Federal Reserve will cut interest rates five times in 2024 as inflation cools, paving the way for looser monetary policy.
• The bank forecasts global inflation will continue falling rapidly, allowing earlier and more aggressive rate cuts from the Fed and other major central banks.
• Goldman expects the Fed to cut rates 25 basis points at three consecutive meetings between March and June 2024, with two more cuts in the second half of the year.

Goldman Sachs predicted on Monday that cooling inflation will allow the Federal Reserve to cut interest rates five times in 2024. The bank’s chief economist said the world economy has entered a period of “great disinflation” that will pave the way for looser monetary policy.

The Great Disinflation

According to Goldman Sachs, global inflation continues to fall rapidly. As a result, the bank expects earlier and more aggressive rate cuts from the Fed and other major central banks in developed markets.

Five Rate Cuts Expected In 2024

Goldman Sachs forecasts the Fed will cut rates 25 basis points at three consecutive meetings between March and June 2024. They predict two more cuts in the second half of the year. Traders are also betting on five rate cuts next year based on futures market pricing.

Powell Signals Pivot To Easier Policy

The new outlook comes after Fed Chair Jerome Powell said last week that rate cuts could come sooner than expected. Powell noted that moderating inflation allows policymakers to dial back the amount of restraint in place. His dovish comments sparked a surge in the stock market.

Conclusion

With inflation cooling, Goldman Sachs believes the Fed can slash rates five times in 2024 to support the economy. The bank expects solid growth and a falling unemployment rate next year.