Goldman Sachs CEO David Solomon predicts that the Federal Reserve will avoid emergency rate cuts, as he believes the US economy will likely avoid a recession. “I don’t expect that you’ll see anything before September,” Solomon said on The David Rubenstein Show: Peer to Peer Conversations. “The economy will chug along and we probably won’t see a recession.”
Investors had speculated that the Fed might cut rates sooner after global stock market drops and weaker-than-expected US employment data. At one point, derivative markets showed a 60% probability of a rate cut within a week. Now, bets show little chance of a rate cut before September, but a half-point cut is expected at the September 18 meeting.
Solomon attributed market jolts to Japan’s central bank’s decision to hike borrowing costs, leading investors to unwind carry trades. Goldman economists raised the recession probability to 25% from 15%.