• Goldman Sachs has revised its U.S. interest rate forecast due to stress in the banking system, no longer expecting a rate hike at the upcoming Federal Open Market Committee (FOMC) meeting in March.
• The Treasury Department, the Board of Governors of the Federal Reserve System, and the FDIC have announced rescue measures for depositors of two failed banks: Silicon Valley Bank and Signature Bank.
• Goldman Sachs still expects the Fed to raise interest rates by 25 basis points in May, June, and July, with a terminal rate expectation of 5.25% to 5.5%.

Goldman Sachs Revises Rate Hike Forecast

Global investment bank Goldman Sachs has revised its interest rate hike prediction for the upcoming Federal Open Market Committee (FOMC) meeting in March due to „stress in the banking system.“ Last month, the FOMC increased the federal funds rate by 25 basis points to a target range of 4.5% to 4.75%, which is the highest since October 2007.

Rescue Measures Announced For Failed Banks

The Treasury Department, the Board of Governors of the Federal Reserve System, and the FDIC have announced rescue measures for depositors of two failed banks: Silicon Valley Bank and Signature Bank. The Federal Reserve Board also said Sunday that additional funding will be made available to eligible depository institutions.

Federal Reserve Response

In response to these developments, Goldman Sachs economists noted that both steps are likely to increase confidence among depositors but stop short of an FDIC guarantee as was implemented in 2008.

Future Rate Hike Predictions

Goldman Sachs still expects the Fed to raise interest rates by 25 basis points in May, June, and July with a terminal rate expectation of 5.25% to 5.5%.

Conclusion

Despite current market instability, it appears that Goldman Sachs still expects future rate hikes from this year through 2021 despite revising their forecast for March’s FOMC meeting