June 8, 2023

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Federal Reserve Interest Rates: Goldman Sachs Outlook After US Employment Report

Goldman Sachs believes that the Federal Reserve will keep the US federal funds rate unchanged, at the next meeting in June, despite the good numbers in the US employment report, which was released last Friday.

“We still expect a pause in the June meeting due to tightening credit conditions, tightening interest rates, and the fact that (Fed Chair Jerome) Powell’s view of the FOMC statement represents a ‘significant change,’ so Goldman Sachs, in a note to clients.

As for the market, Fed funds futures bet on the Fed’s decision to leave interest rates unchanged in June with a probability of 91.5%.

Bets on a June rate hike are weighted at just 8.5%.

Markets also expect the Fed to cut interest rates, currently in the range of 5 to 5.25%, by the end of the year.

From the US employment report, it emerged that the US economy created 253,000 new jobs in April.

The number was much better than expectations, with an increase of 180,000 units.

The unemployment rate fell from 3.5% to 3.4%, while average hourly earnings, which is one of the most important criteria for assessing the direction of inflation, increased by 0.5% on a monthly basis, after +0.3% in March.

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