Goldman Sachs Experts Share Their Outlook

Based on their insights, analysts at Goldman Sachs Group Inc. predict that the Federal Reserve (FED) will gradually reduce interest rates by mid-next year. Rate adjustments are expected quarterly as the FED attempts to normalize the funds rate.

Goldman's Jan Hatzius and David Mericle elaborated on their forecast in a note last Sunday. They explained:

"The cuts in our forecast are driven by this desire to normalize the funds' rate from a restrictive level once inflation is closer to target."

As per the current projections, the timeline for initiating these rate cuts is set for the second quarter of 2024. Goldman Sachs economists anticipate a reduction of 25 basis points per quarter but acknowledge an element of uncertainty. It indicates a possibility that the FOMC might choose to maintain the status quo if normalization isn't urgent.

Among the latest figures, the core consumer price index showed an annual increase of 4.7% after eliminating food and energy costs.

Notably, the Federal Open Market Committee (FOMC) is projected to refrain from a rate hike in the upcoming month, with a conclusion during the November meeting that the core inflation trend has moderated sufficiently, making an additional rate increase unnecessary.

Earlier this year, Goldman Sachs indicated that the U.S. central bank could raise interest rates thrice in 2023. These projections were echoed by Bank of America Global Research, which had additionally forecasted a terminal rate ranging from 5.0% to 5.25% by the close of the current year. 

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Impact on Bitcoin

The increase in interest rates may result in increased borrowing costs, resulting in fewer trading opportunities and leveraged positions in crypto. When there is uncertainty, traders and investors may opt for less volatile assets, resulting in reduced demand for crypto assets like Bitcoin. 

On July 26, the FED raised its key interest rate to as much as 5.5%, the highest level in 22 years. However, Bitcoin exhibited resilience during the recent interest rate increases, affirming its growing reputation as a respected asset class among investors even during the anticipation of rate hikes. 

The upcoming interest rate cuts may lead to more interest and demand for Bitcoin, potentially raising its price. Bitcoin is trading at $28,381, with almost no change over the last 24 hours. 

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Disclaimer: Nothing in this article is intended to constitute financial advice. The content of this article is intended for entertainment and educational purposes only. Investing in cryptocurrency carries a high degree of risk. Capital is at risk, and returns are never guaranteed. You should always do your research.