Goldman Sachs CEO Doubts Fed’s Aggressive Rate Cut Prediction

Goldman Sachs CEO David Solomon dismissed the possibility that the US Federal Reserve will rate cut by 50 basis points at its September meeting, just days after Standard Chartered Bank made the bold forecast. Speaking in an interview with CNBC, Solomon said, “Whether or not we have a 50 basis cut, I don’t think that’s probably on the cards.”

Data from the CME FedWatch Tool shows that only 7.8% of market participants expect such a deep cut at the Fed’s Sept. 17 meeting. Despite this, Standard Chartered raised its forecast, pointing to weaker-than-expected job numbers in August, as reported by Reuters. 

Crypto trader Mister Crypto commented on X, saying, “If that happens, crypto will explode through previous ATHs,” reflecting optimism in the crypto community.

Solomon Expects a 25 Basis Rate Cut

Solomon expects the Fed to align with broader market expectations, where over 92% of participants anticipate a smaller 25 basis point cut. “I’m pretty confident we’ll have a 25 basis rate cut,” he added. 

He also highlighted signs of softening in the labor market, stating, “There’s no question that when you look at the labor market, there’s a little bit of a softening.”

The Goldman Sachs CEO further suggested that depending on how economic conditions evolve, there could be one or two more rate cuts this year. “I think you could see one or two other cuts, depending on how economic conditions play out from here,” he said.

Fed Decision Could Impact Both Traditional and Crypto Markets

The Fed’s decision in September is significant for both traditional and crypto markets. Lower interest rates tend to make safer assets like bonds less attractive, pushing investors toward higher-risk, higher-reward assets such as cryptocurrencies. 

However, sentiment platform Santiment recently cautioned that a surge in social media discussions around the Fed’s potential cut could signal excessive euphoria. 

“Historically, such a massive spike in discussion around a single bullish narrative can indicate that euphoria is getting too high and may signal a local top,” Santiment noted.

Standard Chartered is not alone in adjusting its forecasts. Analysts at Bank of America recently shifted their view from no cuts to predicting two 25 basis point cuts this year. Fed Chair Jerome Powell also hinted at a possible rate reduction during his keynote at the Jackson Hole Economic Symposium in August, adding fuel to speculation.