What Action Will The Fed Take Next Week? This is the view of Goldman Sachs

<p>&nbsp;An interest rate hike expected by the Federal Reserve at its upcoming policy meeting next week will be "the last" in the US central bank's long-term tightening cycle, according to analysts at Goldman Sachs.</p><p><br /></p><p>In a note to clients, Goldman analysts said the rate-setting Federal Open Market Committee is likely to raise borrowing costs to a range of 5.25% to 5.5% later Thursday.</p><p><br /></p><p>At the same time Goldman stated that: "The main question is the extent to which the Chairman of the Fed Jerome Powell will show support for the 'cautious measures' he supported in June".</p><p><br /></p><p><br /></p><p>Fed officials now face a mixed economic picture. Inflation that was the main driver of the Fed's recent unprecedented rate hike slowed sharply in June, which Goldman analysts said could prove to be a "turning point" in the bank's efforts to control high price growth. However, activity data also showed demand growth exceeding potential in the first half of 2023, while financial conditions eased.</p><p><br /></p><p>Taking this into account, Goldman analysts said they believe the Fed will ultimately choose to be "more hawkish than the market has priced in."</p><p><br /></p><p>"This reflects both the lower probability of a recession and our hope that the threshold for rate cuts will be high enough and the cuts will be gradual," they added.</p><p><br /></p><p>They added that they expect the Fed to begin cutting rates by 25 basis points per quarter starting in the second quarter of 2024, eventually lowering the closely watched Fed Funds rate to between 3% and 3.25%.</p>