Goldman Is No Fed Whisperer. The Bond Market Is Yelling.
The bank’s bold forecast is simply reflecting seismic shifts in the Treasury market.
The decline in stocks pales in comparison to the move in 10-year Treasuries.
Photographer: Spencer Platt/Getty Images
Over the weekend, Goldman Sachs Group Inc. economists made what appeared to be a bold call. They predicted Federal Reserve officials would slash interest rates by 50 basis points at their meeting this month, if not sooner, and take the fed funds rate down an additional 50 basis points by the end of June.
The words of Jan Hatzius, Goldman’s chief economist, are closely followed in the $16.7 trillion U.S. Treasuries market. It’s not necessarily that he’s the most accurate forecaster — along with strategists at JPMorgan Chase & Co., Hatzius stuck with a call of four Fed interest-rate hikes in 2019 as late as December 2018 — but he will occasionally voice frustration at how the central bank is following financial markets rather than economic data. That’s a popular criticism and strikes at the heart of the Fed’s dilemma around the worldwide coronavirus outbreak.