Economist Jan Hatzius of Goldman Sachs stated on Sunday that the bank is no longer anticipating a rate hike from the Federal Reserve at next week’s March Federal Open Market Committee meeting.
Goldman Sachs wrote in a note that due to “recent stress in the banking system,” they do not anticipate a rate hike from the FOMC at their meeting on March 22.
In spite of this, Goldman Sachs maintains its terminal rate projection of 5.25% to 5.5% and predicts 25 basis point hikes in May, June, and July, but said it saw considerable uncertainty about the rate hike path beyond March.
Goldman previously expected a 25-basis-point hike in March.
On Sunday, U.S. authorities assured customers of the defunct Silicon Valley Bank that they would have full access to their savings beginning on Monday. They also established a new facility to provide financial institutions with access to emergency liquidity. The Fed also streamlined the process through which banking firms may obtain emergency loans from the central bank.
Goldman Sachs said they believed the measures implemented by authorities would restore confidence among depositors and provide substantial liquidity to banks experiencing deposit outflows.
Meanwhile, the pace of job growth slowed in February to 311,000, from the previous month’s record-breaking 363,000, but the gain was still strong enough to prompt the Federal Reserve to consider raising interest rates more quickly than expected to combat inflation.
On Friday, the Labor Department reported that the unemployment rate had increased from a 54-year low of 3.4% to 3.6%. This increase was due in large part to the 419,000 additional workers who had entered the labor force.
The 225,000 jobs added were less than what the economists polled by Bloomberg had predicted.
Both Oxford Economics and Pantheon Macroeconomics predict that the Fed will approve a quarter-point rate hike on March 22, while Barclays expects a half-point increase.