Probability of Fed hiking in June incraeases to 90%
Goldman in saying a June Fed rate hike is at 90% (up from 85%) and that the peak in US rates may also be higher than expectations.
The Fed is scheduled to meet this week but are expected to keep rates on hold. The Fed has said that they will raise rates 3 times in 2018 (they have raised once), but more economists are thinking 4 in total might be the number. The Fed has raised rates by 150 basis points since they started the tightening cycle. Although Goldman thinks a 325 pip rise would be the peak, they are also not ruling out a higher number.
Goldman said "the Fed's challenge is to bring about a policy tightening sufficient slow growth to a sustainable pace but not tipped economy into recession". They add that there is "still little evidence that is close to the halfway mark for this perspective".
They estimate that only around a quarter of the required slow down to a trend pace has occurred. They do not expect that picture to change quickly.
