Goldman Sachs Expects Central Banks to Be on Course with Rate Cuts despite Bumpy Inflation

Goldman Sachs stated that global economies experience a speed bump in inflation, but that does not derail rate cuts from central banks.

In a note, Goldman Sachs stated that Core inflation in the US has risen recently, with core PCE inflation estimated at 0.29% in February, compared to an average of 0.13% in Q4. However, despite some increases, the overall view is that inflation will stabilize, especially in the US, Canada, and Japan, while it rose to 3.4% in the Euro area and 4.4% in the UK.

Goldman Sachs remains confident in a soft economic landing, supported by resilient US growth data, ongoing labor market adjustments, and a slowdown in wage growth. The global investment bank forecasts a continued decrease in inflation and expects the Fed, ECB, BOE, and BoC to commence rate cuts in June. With signs of economic weakness in Europe, it is anticipated that the ECB and BOE will implement faster rate cuts compared to the Fed.

Goldman Sachs noted that recent central bank meetings indicate an imminent move towards rate cuts, with the Fed projecting three rate cuts in 2024, the BoE maintaining a dovish stance, and the SNB surprising by delivering its first rate cut, citing lower inflationary pressures.