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Goldman Sachs economists expect the Fed to hold off on rate cuts until the fourth quarter of 2024, proceeding in 25 basis point increments per quarter. They anticipate the cuts to end in the second quarter of 2026, leaving the funds rate between 3.5-3.75%. Traders of futures contracts now see the Fed's likely first interest-rate cut pushed to June 2024. Morgan Stanley diverges, forecasting rate cuts to start in June 2024, then again in September and every meeting from the fourth quarter onward, each in 25-basis point increments. UBS and Mulholland & Kuperstock Asset Mgmt. also expect the Fed to make deep interest-rate cuts over the next two years as inflation cools, while Goldman analysts expect fewer reductions and a later start. Fed funds futures trading suggests the initial rate cut may occur as early as May 2024, and CRESSET notes that last month investors were anticipating a June rate cut, indicating a shift in expectations.
