GS assessment of the Federal Open Market Committee and Powell

Jumping straight to the bank's 'Bottom Line":

  • Chairman Powell s press conference positioned the patient wait-and-see approach as the appropriate response to increased downside risks from growth abroad, weaker survey data, and tighter financial conditions
  • Chairman Powell stated that the length of the 'patient period' would depend entirely on incoming data, and also stated that the policy stance was 'appropriate' at this time. with the policy rate now in the range of the Committee's estimates of neutral
  • Powell s comments on the balance sheet appeared to modestly increase the odds of an eventual move to a slower pace of normalization.

We viewed both the January statement and press conference as dovish and have reduced our subjective odds of a March hike to less than 5% (from 10% previously) and our Q2 hike probability to 25% (from 55% previously). This takes our probability-weighted forecast for the funds rate in 2019 from 1.1 net hikes to 0.7 (and our modal forecast from 2 hikes to 1).

Goldman Sachs comments on Fed Chair powell