Goldman no longer expects Fed to raise rates this month; futures surge
By Senad Karaahmetovic
Futures are trading sharply higher in Monday’s pre-open trading after U.S. regulators announced measures to tackle the consequences of the collapse of SVB Financial Group (NASDAQ:SIVB), which was closed due to systematic risks.
The Federal Deposit Insurance Corporation (FDIC) has moved in quickly to protect uninsured depositors in two bank resolutions – Silicon Valley Bank and Signature Bank (NASDAQ:SBNY). Moreover, the Fed and Treasury also announced the Bank Term Funding Program (BTFP), aimed at providing additional liquidity.
“We expect these measures to provide substantial liquidity to banks facing deposit outflows and to improve confidence among depositors,” a Goldman Sachs economist wrote in a client note.
Given the most recent developments, Goldman Sachs no longer expects the Fed will increase rates at next week’s meeting. The bank sees “considerable uncertainty about the path beyond March.”
“We have left unchanged our expectation that the FOMC will deliver 25bp hikes in May, June, and July and now expect a 5.25-5.5% terminal rate, though we see considerable uncertainty about the path.”
The S&P 500 futures are up 1.6% in pre-market trading while Nasdaq and Dow Jones futures are trading 1.7% and 1.15% higher, respectively.