Goldman Sachs(US:GS) Goldman Sachs·2025-03-18 02:02Investment Rating - The report does not explicitly provide an investment rating for the industry or company discussed Core Insights - The FOMC is expected to maintain a cautious stance on interest rate cuts, waiting for clearer economic signals and reduced policy uncertainty under the new administration [3][6][31] - A significant increase in the effective tariff rate has led to upward revisions in inflation forecasts and downward adjustments in GDP growth projections for 2025 [7][19] - The FOMC's median economic projections are anticipated to show a 0.3 percentage point increase in core PCE inflation to 2.8% and a 0.3 percentage point decrease in GDP growth to 1.8% for 2025 [19][21] - The report suggests two potential paths for interest rate cuts: normalization cuts if tariffs are lower than expected, or "insurance cuts" in response to economic risks posed by higher tariffs [31][32] Summary by Sections Economic Projections - The report forecasts a 2025 core PCE inflation of 2.8% and GDP growth of 1.8%, reflecting recent tariff developments [19][21] - The unemployment rate is projected to be 4.2% in 2025, with a gradual decrease to 3.9% by 2027 [21] - The Fed Funds Rate is expected to remain at 3.875% in 2025, with potential cuts later in the year [21][24] Tariff Impact - The effective tariff rate is projected to increase by 10 percentage points, influencing inflation and growth forecasts [7][8] - The report indicates that the FOMC participants may not fully incorporate the new tariff expectations into their projections until more clarity is achieved [18] Policy Uncertainty - Elevated policy uncertainty is likely to keep the FOMC on the sidelines, delaying any immediate interest rate cuts [6][10] - The report highlights that the Fed leadership may prefer to maintain a forecast of two cuts in 2025 to mitigate market turbulence [24][27] Balance Sheet Management - The FOMC is expected to discuss options for slowing balance sheet runoff, with a potential decision to stop Treasury runoff in May [43][44]