Fed unlikely to raise interest rates in November due to ‘better news on inflation,’ Goldman Sachs predicts

The Federal Reserve likely won’t raise interest rates at its annual meeting at the end of next month, strategists with Goldman Sachs predicted Saturday, citing “better news on inflation” as part of the reason for the projection. 

“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,” Goldman Sachs’ report said of the Oct. 31-Nov. 1 meeting.

The strategists also predicted the Federal Reserve would raise its U.S. economic growth projections for 2023 in its annual Sept. 19-20 policy meeting next week from 1% to 2.1%, but the Fed’s “dot plot” projection would likely still pencil in “one more hike, if only to preserve flexibility for now” by a “narrow 10-9 majority.” 

MORTGAGE RATES RISE AHEAD OF SEPTEMBER FED MEETING 

As of Saturday evening, the CME FedWatch Tool predicted there was a 98% chance the Fed would leave interest rates unchanged in agreement with projections from J.P. Morgan Asset Management and Janus Henderson Investors. The tool’s prediction that interest rates will remain the same at the end of October is at a little more than 72%. 

“Given the totality of recent data and the Fed’s previously stated mindset around rate policy, policymakers appear poised to stand pat next week,” Jim Baird, Plante Moran Financial Advisors’ CIO, said in a statement, according to Credible. “Whether another increase could be on the table later this year will depend on the tone of incoming data in the months ahead.” 

The Fed has raised interest rates 11 times since last year. 

If inflation continues to go down the Fed could initiate “gradual” rate cuts, Goldman Sachs added. 

Reuters contributed to this report.