Goldman Sachs says this week’s FOMC meeting is likely to be a boring affair, with the Fed not offering any policy changes and only a few minor changes to their statement language. Overall, this won’t give markets too much time to work out what happens next and Fed Chairman Powell will also play it safe in his press conference.
“The January FOMC meeting is likely to be disappointing, with no change in the fed funds rate, only minor changes to the statement, and few signals about the future policy path. Chair Powell may emphasize that the FOMC has just made three cuts that should help stabilize the labor market and are in good shape for now while it assesses their impact.”
As a reminder, Fed funds futures are not pricing in anything for this week and there is a ~97% chance that there will be no change in interest rates. The first full 25 bps rate cut is for July only and the chances of it extending into June are around ~75%. The latter is where Goldman Sachs sees the Fed moving ahead before just one more rate cut to end the cycle later this year:
“We plan the next 25bp rate cut in June, followed by a final cut of 3-3.25% in September.”
This is roughly in line with Fed funds futures pricing for a ~46 bps rate cut by the end of 2026.
