Goldman Sachs Doesn't See Case For March Fed Rate Hike On Banking System Stress

Goldman Sachs economist Jan Hatzius does not believe there is a case for the Federal Reserve to hike rates at its policy meeting next week owing to "recent stress" in the financial sector, according to a CNBC report.

"In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22," Hatzius wrote in a note, the report said.

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Fed Steps: Goldman Sachs economists stated that the package of relief measures which were announced on Sunday stops short of similar actions during the 2008 financial crisis.

The Treasury designated Silicon Valley Bank SIVB and Signature Bank SBNY as systemic risks, while the central bank created a new Bank Term Funding Program to backstop institutions impacted by market instability following the SVB failure, the report said.

"Both of these steps are likely to increase confidence among depositors, though they stop short of an FDIC guarantee of uninsured accounts as was implemented in 2008," the economists wrote.

"Given the actions announced today, we do not expect near-term actions in Congress to provide guarantees," they said, adding that they expect the latest measures to "provide substantial liquidity to banks facing deposit outflows."

Goldman said it still expects to see 25 basis point hikes in May, June and July, and reiterated its terminal rate expectation of 5.25% to 5.5%.

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