Goldman Sachs CEO Solomon changes his tune! The Fed will cut interest rates once or twice this year

Goldman Sachs Group CEO David Solomon said that later this year, the Federal Reserve may cut interest rates once or twice, which is different from his prediction two months ago that there would be no rate cuts in 2024.

Two months ago, Solomon said at an event at Boston College, "I still expect zero rate cuts this year. I believe we are prepared to deal with more severe inflation."

He stated that he still has not seen convincing data to suggest that the Fed will cut rates. Investments in artificial intelligence infrastructure will also help the U.S. economy demonstrate resilience under the Fed's tightening monetary policy. However, the risk of some "real and obvious" economic slowdown is greater than eight months ago.

On Tuesday this week, Solomon said in an interview, "It seems more likely that there will be one or two rate cuts in the fall. Undoubtedly, consumer behavior has changed, and the long-standing inflation pressure, although easing, has already affected consumer habits."

While the current underlying economic conditions remain "relatively mild," Solomon said the outlook is still uncertain, and he questioned whether one or two rate cuts would create a "completely different policy landscape."

Solomon said, "What is still unclear is the trajectory of the economy in the next 12 to 18 months, so determining interest rate trends and policy directions, I think it is still too early."

In addition, Michael Green, Chief Strategist at Simplify Asset Management, shared his views on interest rates and Fed decisions.

Green described the Fed under Powell as "a series of panics," mentioning rate cuts during the mortgage crisis, the "understandable panic" during the COVID-19 pandemic, and the rate hike decision in 2022. He said, "The speed of rate hikes did not even give the market time to adjust itself." He pointed out that Powell did not show a "profound understanding of the role of interest rates in controlling inflation."

Regarding the Fed's next steps, Green noted that inflation levels since July 2022 have been "basically within historical normal ranges." He believes that "the Fed is too late in the rate-cutting process" and thinks that economic data does not reflect the actual state of the economy.

Green said, "The Fed has created a problem that it now needs to figure out how to handle."