Goldman Sachs: “Oil-price surge is skewing the rate-path outlook…markets overpricing tightening”
Summary
- Goldman Sachs said that despite a sharp rise in oil prices, markets are excessively pricing in the Federal Reserve (Fed)’s tightening path.
- Goldman Sachs said the probability of rate hikes being priced in on the back of a surge in Brent crude is overstated compared with past episodes.
- Goldman Sachs said that if a growth slowdown materializes, the Fed could instead pivot to a more accommodative policy, allowing rate cuts to be implemented.
Forecast Trend Report by Period
A new analysis says markets are excessively pricing in the Federal Reserve (Fed)’s tightening path amid inflation concerns driven by a sharp rise in oil prices.
According to Walter Bloomberg, an overseas markets breaking-news channel, in a post on X (formerly Twitter) on the 30th, Goldman Sachs said in a recent report that “investors are overestimating the likelihood of rate hikes based on higher oil prices.”
With Brent crude briefly topping $115 a barrel recently, expectations have grown that the Fed will respond more hawkishly (favoring tighter monetary policy). Goldman Sachs said “this reaction is excessive compared with past episodes.”
Citing the 1990 episode in particular, it noted that markets also anticipated tightening after an oil-price spike at the time, but rate cuts were implemented instead as growth slowed.
Goldman Sachs said that “while the market is pricing in a higher probability of rates rising, if a growth slowdown materializes the Fed could instead pivot to a more accommodative stance.”
Minseung Kang
minriver@bloomingbit.ioBlockchain journalist | Writer of Trade Now & Altcoin Now, must-read content for investors.
