Goldman Sachs Note Expects Fed to Pause Next Rates Hike Following Banking Crisis

Goldman Sachs (NYSE: GS) believes the US Fed will not raise rates as planned due to current macroeconomic conditions. In a note published Monday morning, banking giants economist David Mericle pointed to the ongoing banking crisis as a deterrent. According to Mericle, the recent collapses of Silicon Valley Bank (SVB) and Signature Bank make any rate hike intolerable. As a result, the Goldman economist predicts that the Fed will hold off on its planned rate hikes until things boil over.

Speaking ahead of this week’s Federal Open Market Committee (FOMC) fiscal meeting, Mericle explained:

“We expect the FOMC to pause at its March meeting this week due to stress in the banking system. While policy makers have responded aggressively to strengthen the financial system, markets do not appear to be entirely convinced that Efforts to support small and medium-sized banks will prove sufficient.”

Mericle also pointed out that in addition to the recent banking turmoil, the urgency to raise rates is no longer in effect. According to him, the inflation picture is already looking much better than last summer. This is because of the sharp decline in near-term inflation expectations, while long-term inflation expectations are also stable.

However, Merkel was quick to acknowledge that the link between the 25 basis point hike and future inflation remains “very weak”. Thus, the Federal Reserve may resume its campaign of continuing to raise rates to prevent rapid inflation. As it stands, the US top bank still expects quarter-point growth from May to July.

Goldman economist predicts Fed rate hike amid Credit Suisse’s UBS bailout

As of last Friday, most Wall Street economists and analysts expected another rate hike of 25 basis points this week. The general consensus was that the Fed would push ahead with its inflation-battered plan despite an already highly beleaguered financial sector. However, Mericle’s latest stance on the central bank’s next fiscal move is starting to pick up steam in his circles. Moreover, their predictive valuation should also be a welcome relief to the already agitated banking space.

A meeting in early January of the Virginia Bankers Association was already concerned that the Fed’s actions had made it harder to compete for deposits. Speaking on the subject, Richmond Fed President Thomas Barkin said the pressure for an imminent rate hike was widespread and clear.

The recent collapse of at least three major banks in the US sent shock waves through the global financial sector. The contagion also spread to Europe, with Swiss banking giant Credit Suisse teetering on the brink of bankruptcy. however, credit Suisse recently a safe emergency relief cross-town rival UBS,

Colm Kelleher, chairman of UBS, explained that the Credit Suisse takeover is very attractive to UBS because of the sheer size of the troubled bank. According to him, these assets will further the agenda of UBS. UBS as chairman Keep This:

“We have structured a transaction that will preserve the remaining value in the business while limiting our downside risk. Acquiring Credit Suisse’s capabilities in wealth, asset management and Swiss universal banking will allow us to enhance its capital-lite business. will strengthen UBS’s strategy.”

However, Kelleher also acknowledged that the upside for Credit Suisse is limited to the ‘hedge’ nature of the deal.

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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to strip crypto stories down to the basics so that anyone anywhere can understand without a lot of background knowledge. When he is not delving deep into crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.