Fed's Rate Cut 'Maintain A Soft Landing Trajectory' For US Economy, Says Goldman Sachs

Goldman Sachs CFO Denis Coleman stated that the Federal Reserve’s recent decision to lower interest rates by 50 basis points positions the U.S. economy for a soft landing.

What Happened: The Federal Open Market Committee voted last Wednesday to reduce the benchmark overnight borrowing rate by half a percentage point, targeting a rate of 4.75% to 5%. This marks the first significant cut since the early days of the COVID-19 pandemic.

Coleman expressed optimism while talking to CNBC on Monday, saying, “This first 50 basis point cut is a clear signal in terms of the new direction,” adding that he anticipates that this move will boost market confidence and reduce capital costs.

Talking about a soft landing, he said that while it is in the general consensus, "It's always a very tricky job to manage economies through transition. But you know, inflation levels are coming down, unemployment is manageable, they're starting to put through the rate cuts and sort of maintain a soft-landing trajectory.”

See Also: Obama-Era Economist Says She Is ‘Pleasantly Surprised’ That JD Vance Thinks The ‘Economy Is Too Strong For The Rate Cut’

However, not all experts share this optimism. JPMorgan Chase CEO Jamie Dimon voiced skepticism in an interview, stating, “Short term, I’m a little more skeptical than other people that everything’s going to be great.”

Why It Matters: The Federal Reserve’s decision to cut interest rates by 50 basis points marks the first rate cut in over four years. This bold move surprised Wall Street analysts, who had expected a more modest 25-basis-point cut. The larger reduction resonated with investor sentiment, leaning towards a more aggressive easing approach.

Additionally, Chicago Federal Reserve President Austan Goolsbee hinted at a series of interest rate cuts over the next 12 months during a discussion at the Economic Club of Minnesota. Goolsbee suggested that the Fed is preparing to shift away from its current restrictive stance to support economic conditions, as the focus shifts from inflation to the labor market. He warned that a 0.7% increase in unemployment within a year is typically a precursor to a recession, noting the rapid deterioration of the labor market.

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Illustration created using artificial intelligence via MidJourney.

This story was generated using Benzinga Neuro and edited by Pooja Rajkumari