Goldman Sachs: Fed Might Hold Off Rate Hike To December
The Federal Open Market Committee is likely to signal a September rate hike after it meets later this week, according to an analyst.
But in a recent note, the Goldman Sachs' analyst, Jan Hatzius, cautioned that there remains "a significant probability" that the Fed might hold off on a rate hike until December or later.
A survey of 55 economists last week by Reuters found about 67 percent predicting a rate hike in September, the first increase in nearly a decade.
Only two of the economists polled expect a rate hike this week.
Most Fed officials, including Chair Janet Yellen, Vice Chair Stanley Fischer and New York Fed President William Dudley, have recently adjusted their language to indicate that hikes are likely "at some point this year," Hatzius said.
"This suggests a desire to maintain flexibility on September versus December," according to Hatzius.
Growth taken as a whole during the first half of 2015 "still looks likely to be anemic," with economic headwinds from a stronger dollar and a weakened energy sector, Hatzius said.
Growth was pulled down by a slower first quarter, but Hatzius noted that the current period "seems to be back on track," with second-quarter growth running at about 3 percent.
Yellen has said the Fed's inflation target is 2 percent, yet by one key measure, inflation is running at just 1.2 percent, down from 1.4 percent when the FOMC last met in April, according to Hatzius.
The analyst cited the personal consumption expenditures price index, which he said is the Fed's preferred inflation measure.
Longer-term inflation expectations are little changed, and are "probably inconsistent" with the Fed's 2 percent goal, Hatzius said.
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