Given the red-hot job market and the fact that economic growth is far higher than its potential level, while inflation still meets its target, the Fed is expected to raise interest rates by one yard next week. However, two months of volatility in financial markets and a slowdown in overseas economies have raised doubts about whether the Federal Reserve can raise interest rates three times in 2019, as its officials expected.
The sharp tightening of the financial environment has convinced Jan Hatzius, chief economist at Goldman Sachs, that it is now more likely that the Fed will suspend interest rate hikes in March next year and then continue to raise interest rates three times later in 2019. Goldman Sachs had expected to raise interest rates four times next year, much more than the financial markets had expected.
"We believe that the possibility of action in March has now dropped to slightly less than 50 percent," Goldman Sachs's Hatzius wrote in a study on Monday. But "we think we will restart the quarterly rate hike model in June until the end of 2019."
Hot Model No.: