The US Federal Reserve is not expected to increase interest rates during its meeting on October 31 to November 1, according to Goldman Sachs strategists, who also predicted that when policymakers meet next week, the U.S. central bank would raise its economic growth projections.

“On November, we think that further labor market rebalancing, better news on inflation, and the likely upcoming Q4 growth pothole will convince more participants that the FOMC (Federal Open Market Committee) can forgo a final hike this year, as we think it ultimately will,” the investment bank’s strategists wrote in a report.

But according to Goldman’s strategists, the Fed’s “dot plot,” which represents policymakers’ projected interest rates and will be revised on Wednesday, will show “a narrow 10-9 majority still pencilling in one more hike, if only to preserve flexibility for now,” they said.

Following the most aggressive monetary policy tightening cycle in decades, some major investors, including J.P. Morgan Asset Management and Janus Henderson Investors, have said that the Fed is likely done raising rates as market participants attempt to predict the direction of the central bank’s monetary policy.

According to CME Group’s FedWatch Tool, futures linked to the Fed’s benchmark overnight interest rate were pricing in a 98% likelihood that the central bank would maintain rates at the conclusion of its meeting on September 19–20.

The odds of the policy rate being unchanged during the Oct. 31–Nov. 1 meeting, which is now in the 5.25%–5.50% range, were about 72% on Saturday, according to data from CME.

If inflation stays low, rate reduction might be “gradual” in the coming year, according to Goldman’s strategists.

When policymakers revise their economic projections on Wednesday, they may increase the central bank’s expectations for U.S. growth to 2.1% from 1%, highlighting the economy’s resiliency.

Additionally, Goldman’s strategists anticipate that the Fed will cut its estimates for core inflation and unemployment for 2023 by four-tenths of a percentage point and two-tenths of a percentage point, respectively.

(Adapted from MoneyControl.com)

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