Jinshi Data

Goldman Sachs Group Chief Executive David Solomon said the Federal Reserve could cut interest rates once or twice later this year, a departure from his forecast two months ago that there would not be any cuts through 2024.

“I still hold onto my forecast of zero rate cuts this year,” Solomon said at a Boston College event two months ago. “I think we are ready for more inflation.”

He said he still hasn't seen convincing data that the Fed will cut interest rates. Investment in artificial intelligence infrastructure will also help the U.S. economy show resilience under the Fed's tight monetary policy. But the risk of some kind of "real and obvious" economic slowdown is greater than eight months ago.

“One or two rate cuts in the fall seem more likely,” Solomon said in an interview on Tuesday. “There is no doubt that there have been some changes in consumer behavior, and the prolonged period of inflationary pressures, although easing, has had an impact on consumer habits.”

While the current underlying economic picture remains “relatively benign,” Solomon said the outlook remains uncertain, and he questioned whether one or two rate cuts would produce a “completely different policy picture.”

"What remains unclear is the trajectory of the economy over the next 12 to 18 months, and I think it's premature to make that determination about where interest rates are going and where policy is going," Solomon said.

Additionally, Michael Green, chief asset management strategist at Simplify, shares his thoughts on interest rates and the Fed's decision.

Green described the Fed under Powell as "a series of panics," citing rate cuts during the collateral crisis, "understandable panic" during the COVID-19 pandemic, and the decision to raise rates in 2022. "The pace of the rate hikes didn't even give the market time to adjust itself," he said, noting that Powell had not demonstrated "a deep understanding of the role of interest rates in controlling inflation."

Regarding the Fed's next move, Green pointed out that the inflation level after July 2022 is "basically within the historical normal range." He believes that "the Fed is too late in the process of cutting interest rates" and believes that economic data does not reflect the actual situation of the economy.

“The Fed created a problem that it now needs to figure out how to deal with,” Green said.

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