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Tuesday, October 20, 2015

Goldman Says Fed Likely to Hold Off Rate Hike as Negative Data Pours In

Goldman Says Fed Likely to Hold Off Rate Hike as Negative Data Pours In

Goldman Sachs officials are ready to push back their rate hike forecast to late 2016. As Bloomberg reported, they are hedging their bets on a December rate hike (probably to save face):
Goldman Sachs Group Inc. said there’s a chance U.S. policy makers will delay raising interest rates well into next year. While Goldman Sachs’s central forecast is still for a December liftoff, a slowdown in output and employment may justify the Fed keeping rates near zero for ‘much longer,’ the bank said in a report.”
Peter has been saying the Federal Reserve won’t raise rates all year. Now, as the year winds down and bad economic data continue to leak out, the mainstream appears to be catching up. Peter said it will eventually wake up completely.
The pretense that the Fed is about to raise rates, that a rate hike is just around the corner is going to end. It cannot withstand all of this negative economic news.”

It’s no wonder even Goldman is starting to see the writing on the wall. First, we had a dismal jobs report last week. Rather than creating more than 200,000 jobs, and instead of revising upward the prior month to greater than 200,000 jobs, we got a number that was far below – not only for September but also for August.
Then on Monday, numbers came out pointing to a slowdown in the all-important services sector.
The US Markit composite PMI came in at 55.0 in September, missing the expectation of 55.6 and hitting its lowest level since June. The index dropped from 55.7 in August. According to Markit, “Slower US private sector output growth mainly reflected a weaker contribution from services”
The Markit services PMI plunged a full point, from 56.1 in August to 55.1 in September.
The ISM services index also dropped to 56.0, missing expectations as well.
That led Tyler Durden at Zero Hedge to declare the “bounce” dead:
This catch-down to Manufacturing weakness suggests the mid-year bounce is well and truly dead as even Markit admits, ‘it remains unclear as to whether growth will weaken further as we move into Q4.'”
While the mainstream media continues to paint a rosy picture and trumpet “sustained growth,” the numbers are trending downward, and as Peter has said, it points to the possibility of a recession:
One thing that Goldman Sachs is overlooking is between now and then we’re probably going to be back in recession. And what does that mean? That means QE4. In fact, there’s a pretty good chance that we might get a negative GDP print for the third quarter. And if we get a negative GDP print in the third quarter, I bet we get one in the fourth quarter too, and that means we’re in recession. And of course we know what the Fed is going to do.”

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