Goldman Sachs Economists Now Believe The Fed Won't Hike Rates In June — Here's Why

Goldman Sachs economists no longer expect the Federal Reserve to hike interest rates in June, according to a report that cited a research note published on Wednesday.

What Happened: “We have taken out the June hike in part because the limited data available so far appear to confirm that credit is indeed somewhat tight in the aftermath of the banking turmoil, and in part because some Fed officials appear hesitant about even a May hike,” the economists wrote, according to a Reuters report.

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Goldman Sachs had earlier expected consecutive rate hikes at the central bank's May and June meetings.

Meanwhile, BofA Global Research said the March inflation data likely keeps the central bank on track for a rate hike in May. “Despite the improvement in March, inflation is still likely much too high from the Fed’s perspective,” BofA economists wrote, according to Reuters.

Price Action: U.S. markets ended in the red on Wednesday after Fed meeting minutes from last policy showed members expected the recent banking crisis to tip the economy into a mild recession later this year.

The Fed minutes showed that participants observed inflation remained much too high and that the labor market remained tight. "…as a result, they anticipated that some additional policy firming may be appropriate to attain a sufficiently restrictive policy stance to return inflation to 2 percent over time," it said.

Meanwhile, U.S. inflation rate slowed more than expected to 5% year-on-year in March, marking the lowest print since May 2021.

The SPDR S&P 500 ETF Trust SPY closed 0.41% lower while the Invesco QQQ Trust Series 1 QQQ lost 0.88%.

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