Goldman Sachs: FOMC Minutes Show Several Participants Open to Further Cuts
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Goldman Sachs analyzes the January FOMC meeting minutes, noting that several participants indicated further rate cuts would be appropriate if inflation declines as expected. Conversely, some participants preferred holding rates steady for a time while assessing incoming data, and several would have supported a two-sided risk description acknowledging that rate hikes could also be warranted if inflation persists above target. Nearly all participants supported keeping the federal funds rate at 3.5-3.75%, though Governors Miran and Waller dissented, favoring a 25-basis-point cut. The vast majority observed some stabilizing signs in the labor market, though risks remain skewed to the downside. Participants generally expect inflation to return to the 2% target, but most warned that progress could be slower and more uneven, with significant upside risks. Fed staff revised their January GDP growth forecast higher compared to December, projecting above-potential growth through 2028. Staff inflation projections were slightly higher, reflecting greater resource utilization and core import prices. Goldman Sachs maintains its view that the next rate cut will come in June, followed by another 25-basis-point reduction in September, assuming no further labor market deterioration.