Fed rate hike coming soon – Goldman Sachs

The analysis team at Goldman Sachs explain that the recently published minutes to the May FOMC meeting mirrored the statement in downplaying the weak Q1 GDP print and the soft March inflation data, and also noted that most participants judged that “it would soon be appropriate” for the FOMC to hike again. 

Key Quotes

“The minutes also contained new information about the eventual process for phasing out reinvestment, which will likely occur by “preannouncing a schedule of gradually increasing caps to limit the amounts of securities that could run off in any given month.”  We continue to see an 80% probability of a rate hike at the June meeting and expect this to be followed by another rate hike in September and the announcement of balance sheet normalization at the December meeting.  However, we see the risks to the timing of the balance sheet announcement as skewed toward the September meeting.”