Goldman Sachs: Inflation Nearing End, Interest Rates to Stabilize

Goldman Sachs economists predict that the Federal Reserve's efforts to curb inflation will soon show signs of deceleration, with core inflation entering its "final descent" towards the Fed's 2% target. However, they do not expect interest rates to return to near-zero levels. Goldman forecasts that the Fed will decrease the federal funds rate by 25 basis points in early 2024 and continue with quarterly rate cuts until the second quarter of 2026, ultimately settling at an equilibrium of 3.5% to 3.75%. This is higher than the rates seen between the Great Recession and the current hiking cycle. The decision not to return rates to near-zero is seen as a compromise between those who believe it is unnecessary to keep rates high once the inflation problem is solved and those who see little reason to stimulate an already-strong economy.