①Lindsay Rosner, head of multi-sector investing in Goldman Sachs Asset and Wealth Management, warned that there is a “relatively high possibility” of a Federal Reserve rate hike in July, with a probability of 50%.
②In a latest interview, she noted that upcoming inflation data, particularly the personal consumption expenditures report, is a key factor that could prompt the Federal Reserve to take action.
June 24 News: Lindsay Rosner, head of multi-sector investing in Goldman Sachs Asset and Wealth Management, issued a latest warning that there is a “relatively high possibility” of a Federal Reserve rate hike in July, with a probability of 50%.
In a latest interview, she noted that upcoming inflation data, particularly the personal consumption expenditures report, is a key factor that could prompt the Federal Reserve to take action.
Rosner described the “debut” of “new chief” Kevin Warsh at the Federal Reserve as a major “regime change” that caught the market off guard.
“There was a big discussion point at the time. How dovish would he be? What the market was debating was not ‘Will he not be dovish?’ but ‘How dovish will he be?'” she said. “But in reality, what we saw was an unexpectedly hawkish stance.”
This new chairman, known for being tough and sparing with words, did not provide his own dot plot or any forward guidance, and cut the word count of the FOMC statement to less than one-third of previous versions. At the same time, however, he emphasized that the commitment to achieving the 2% inflation target is firm, consistent and clear. The Federal Reserve has failed to meet its inflation target for five years and is now moving to correct that.
“We thought he was a dove who advocated lowering the federal funds rate,” Wall Street veteran Ed Yardeni, founder of investment advisory firm Yardeni Research, and his team previously wrote after Warsh’s press conference. “However, he repeatedly emphasized a strict, orthodox inflation policy and a firm commitment to maintaining price stability.”
Therefore, there is no doubt that the Federal Reserve is currently fully committed to restoring the inflation rate to its 2% target.
Rosner pointed out that policymakers rarely discuss the labor market aspect of their dual mandate. This shift toward a hawkish stance has driven volatility at the front end of the yield curve, while the back end has remained relatively stable, as the market has already priced in stable inflation and growth expectations.
She also emphasized that the Federal Reserve is abandoning its traditional approach of forward guidance and instead responding to real-time data.
“Fifty-fifty may sound overwhelming, but what it means is that we focus on the present, and I think that is slightly different from our past approach of looking to the future for guidance,” she explained.
Rosner further noted that the wealth effect generated by rising stock prices may be reflected in inflation data, potentially serving as a justification for interest rate hikes.
She pointed out that items such as software and accessories within the personal consumption expenditure basket related to artificial intelligence spending are expected to rise in the next report, and the Federal Reserve will have to respond to this.
Goldman Sachs has adjusted its internal view accordingly, postponing its expected rate cut timeline to late 2027.
