Goldman Sachs no longer believes in a May rate cut

Analysts at Goldman Sachs no longer expect a cut in US interest rates in May and forecast four 25bp cuts this year, with policymakers' rhetoric suggesting they are in no hurry to ease policy.

"With only two sets of inflation data and just over two months until the May meeting, his comments suggest to us that a rate cut as early as May, which we had previously expected, is unlikely," wrote Goldman Sachs analysts in a note. They now expect a further cut next year, with an unchanged final rate forecast of 3.25% to 3.5%.

CME's FedWatch tool, which provides rate movement probabilities based on futures contracts, gives only a 21% probability to a rate cut in May, or 79% in favor of a status quo in the current range (5.25 to 5.50%). A rate cut following the June 11-12 meeting, on the other hand, is assigned a 64.7% probability on February 23, 2024, versus 35.3% for a pause.