Is the "rate hike nightmare" really coming? Goldman Sachs Head of Investment: July is more likely!

Goldman SachsLindsay Rosner, Head of Multi-Industry Investments at Asset and Wealth Management, recently warned that the "high" probability of a Fed rate hike in July is 50%.

In her latest interview, she pointed out that upcoming inflation data, especially the Personal Consumption Expenditures report, could be a key factor that could prompt the Federal Reserve to take action.

Rosner described the "new head" Kevin Walsh's "debut" at the Federal Reserve as a major "institutional change" that caught the market off guard.

"There was a major point of discussion at the time. How dovish would he be? (The market was hotly debated at the time) was not 'Will he not be dovish?' "It's about 'how dovish he will be,'" she said. "But in reality, what we see is an unexpectedly hawkish stance." ”

This "tough man and quiet" new chairman did not provide his dot plot nor any forward-looking guidance, even cutting the FOMC statement to less than one-third of its previous length, yet emphasized that the commitment to achieving the 2% inflation target is firm, consistent, and clear. The Fed has failed to meet its inflation target for five years and now needs to start correcting it.

"We thought he was a dove advocating for a cut in the federal funds rate," wrote Wall Street veteran and investment advisory firm Yardeni Research founder Ed Yardeni and his team after a press conference in Wash. "However, he repeatedly emphasized strict, orthodox inflation policies and was firmly committed to maintaining price stability." ”

Therefore, it is undeniable that the Federal Reserve is currently fully committed to bringing inflation back to its 2% target.

Rosner pointed out that policymakers rarely discuss the labor market aspect within their dual mission. This shift in hawkish stance has driven volatility at the front end of the yield curve, while the lower end has remained relatively stable, as the market has priced in steady inflation and growth expectations.

She also emphasized that the Fed is abandoning traditional forward-looking guidance in favor of reacting to real-time data.

"Fifty-fifty may sound overwhelming, but what it means is we focus on the present, and I think that's a bit different from our past, future-oriented guidance," she explained.

Rosner further pointed out that the wealth effect from rising stock prices may be reflected in inflation data, which could serve as a reason for rate hikes.

She pointed out, withArtificial intelligenceItems in the personal consumption spending basket related to spending, such as software and accessories, are expected to rise in the next report, "and the Fed will have to respond to this."

　　Goldman SachsBased on this, its internal stance has been adjusted, postponing the expected rate cut to the end of 2027.Rosner stated.

For more market information, please visit: https://www.vnstock.asia/