Goldman Sachs warns investors shouldn’t be quick to anticipate rate increase from Fed. BlackRock sticks to the opposite
Goldman Sachs says ’Not so fast’ as BlackRock sees early Fed increase.
“Not so fast,” Jan Hatzius, the chief economist at Goldman Sachs in New York wrote in a report dated yesterday. Labor-market slackness will help keep the Fed from raising borrowing costs until the third quarter of next year, according to Hatzius.
Goldman Sachs is one of the 22 primary dealers trading directly with the central bank.
“The Fed’s going to move faster than people think,” BlackRock’s chief investment officer for fundamental fixed income Rick Rieder said Oct. 3, reiterating an earlier view. “We have an economy today that’s going, we think, quite strong,” he said in an interview with Bloomberg. The firm is the world's biggest money manager, possessing $4.32 trillion in assets.
The current partition outlines the dilemma Fed Chair Janet Yellen faces over when to raise borrowing costs from the record low while growth is uneven.
Ten-year U.S. yields have fallen more than half a percentage point this year as investors sought the relative safety of government debt amid concern the economy is performing below its potential.
The U.S. added 248,000 jobs in September, the Labor Department reported Oct. 3, compared with 215,000 projected by a Bloomberg News survey of economists.
The jobless rate fell to 5.9 percent from 6.1 percent.
While hiring picked up, two reports on Oct. 1 showed U.S. manufacturing growth slowed in September. The implied yield on 30-day federal funds futures expiring in October 2015 was 0.575 percent, indicating traders expect the central bank to increase the target for its main interest rate from the current range of zero to 0.25 percent by then.
Fed officials in September boosted their median estimate for the benchmark for the end of 2015 to 1.375 percent, compared with 1.125 percent in June. They have maintained their target for the rate that banks charge each other on overnight loans close to zero since December 2008.
