Goldman Sachs: Fed Unlikely to Cut Rates Based on Soft Data

Goldman Sachs economists have expressed skepticism about the Federal Reserve's likelihood of cutting interest rates based solely on weak "soft data" from consumer and business surveys. These surveys have indicated an anxious economic sentiment, but the underlying data has not yet shown a significant economic slowdown. Goldman Sachs' team emphasized that the Fed is more likely to wait for evidence from the labor market and other hard data before making any policy changes. This stance is consistent with the view held by other Wall Street institutions, which also predict that the Fed will keep interest rates unchanged in its upcoming rate decision.

Goldman Sachs' economists highlighted that in the recent past, soft data has often erroneously signaled an impending recession. For instance, during the Fed's fight against inflation in 2022, such data did not accurately reflect the economic conditions. Therefore, the Fed is cautious about relying solely on soft data for policy decisions. The investment bank believes that the Fed will prioritize hard data, such as labor market indicators, before considering any rate cuts.

This perspective aligns with the broader consensus among financial analysts that the Fed is unlikely to ease monetary policy based on transient or anecdotal evidence. The focus on hard data reflects the Fed's commitment to a data-driven approach, ensuring that any policy changes are backed by robust economic indicators. As a result, market participants are advised to monitor key economic releases, such as employment reports and inflation data, for clearer signals on the direction of monetary policy.