Goldman Sachs: Fed likely to avoid rate hike until after election

by Ryan Smith09 Sep 2016
Goldman Sachs is betting on no rate hike this month, according to a client email. As a matter of fact, it’s betting that the Fed will keep rates where they are until after the presidential election.

Analysts at Goldman Sachs say it’s unlikely the Fed will raise rates ahead of the November election, HousingWire reported. In an email to clients, Goldman Sachs economist Alec Phillips offered some perspective on the Fed’s typical behavior ahead of important elections.

There are three meetings of the Federal Open Market Committee left this year, and the Fed could decide to raise rates at any one of them. Phillips projected that the odds of a rate increase at the September meeting are about 40%, according to HousingWire. Odds in December are still lower, at only 30%. Phillips didn’t state the percentage for the November meeting, but he said the risk for a rate hike in that month was also low, HousingWire reported.

“First, the FOMC appears to avoid surprises ahead of elections a bit more than it does at other times,” Phillips wrote. “…Second, while the FOMC appears to have a greater aversion to surprise hikes than surprise cuts in general, this pattern appears even stronger in presidential election years.”


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