Goldman Sachs' chief economist anticipates three consecutive interest rate cuts

Goldman Sachs' chief economist also anticipates great disinflation' by summer
An undated image illustrating Goldman Sachs Chief Economist, Jan Hatzius. — Goldman Sachs
An undated image illustrating Goldman Sachs' Chief Economist, Jan Hatzius. — Goldman Sachs

Goldman Sachs' Chief Economist Jan Hatzius has predicted relief for consumers as global inflation experiences a significant drop. He anticipates that major central banks in developed markets will adopt earlier and more aggressive interest rate cuts in 2024 as inflation subsides.

In the US, Hatzius foresees three consecutive 25 basis point interest rate cuts in the first half of 2024, with additional cuts by year-end and more in 2025, resulting in a Fed funds rate between 3.25% and 3.5% by September.

Economic outlook 2024

Goldman Sachs' optimistic outlook celebrates a robust labour market, lower inflation, and sinking interest rates, providing a favourable environment for GDP growth and corporate earnings.

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The optimistic economic forecast is expected to be exceptionally friendly for risk asset markets, leading to significant gains in various sectors, including equities and cryptocurrencies.

Goldman's Chief US Equity Strategist, David Kostin, raises the S&P 500 price target, citing lower inflation, a dovish Fed policy, and a robust economic outlook that supports stocks in 2024.

Economic strength vs. inflation concerns 2024

Hatzius acknowledged that the optimistic outlook for GDP growth and low unemployment could pose challenges if economic strength leads to renewed inflation fears, potentially slowing down interest rate cuts.

Despite initial bearish sentiments, Wall Street is becoming more optimistic, with other financial institutions raising their S&P 500 price targets in response to positive economic indicators.

Echoing Hatzius's sentiment, Infrastructure Capital Management's CEO, Jay Hatfield, predicts that 2024 will be the year of global rate cuts, signalling positive prospects for investors.