The Federal Reserve holds its benchmark rates and it triggers anticipations for interest rate cuts globally.
The interest rate cut forecast by Goldman Sachs suggests that central banks across countries like India and Australia may start cutting interest rates sooner than expected. This is due to the Federal Reserve speeding up its easing cycle.
The anticipation is that we can see interest rate cuts globally to align with the Federal Reserve’s actions.
Goldman Sachs Interest Rate Cut Forecast for India and Australia
As long-term US rates have notably decreased and the dollar has weakened in recent weeks, coupled with the Federal Reserve preparing to initiate an interest rate cut in early 2024, the interest rate cut forecast by Goldman Sachs says that numerous Asia-Pacific central banks can now ease their policies sooner than initially anticipated.
Having adjusted their outlook, Goldman Sachs, in their interest rate cut forecast, says that Indonesia and Taiwan will experience their initial rate cuts in the second quarter of the coming year.
Similarly, they foresee India, Australia, and New Zealand reducing rates in the third quarter, shifting from their earlier projection set for the end of 2024.
However, the interest rate cut forecast by Goldman Sachs emphasizes that the rate cuts in the Asia-Pacific region will be less frequent and less substantial compared to the easing cycle projected by officials from the Federal Reserve.
Barclays Adjusts Its Outlook for Interest Rate Cuts Globally
Barclays Plc has accelerated its projected timeline for interest rate cuts globally. They emphasized mostly among certain emerging Asia central banks, such as Indonesia and the Philippines.
Barclays economists noted, “We initially anticipated regional central banks to maintain their current rates throughout most of 2024, influenced by the Federal Reserve’s hawkish stance.” They also emphasized the recent shift in the United States’ position.
In their note, Barclays economists stated, “We projected that central banks in the region would maintain their current stance for the majority of 2024 due to the Federal Reserve’s hawkish bias.” They also underscored the recent change in direction observed in the United States.
Barclays suggests that certain central banks in EM Asia, particularly the BSP and BI, may advance the initiation of their easing cycles, as they typically align closely with the Federal Reserve.
Barclays maintains the expectation that the Bank of Thailand and Bank Negara Malaysia will maintain their current policies throughout 2024, noting their historically cautious approach in implementing rate hikes.
Goldman Expands in India Amid Global Shift
Meanwhile, Goldman Sachs Group Inc intends to expand its credit business in India. They are identifying a growing opportunity to target the nation’s affluent diaspora.
This strategic move aligns with the shifting focus of global investors from China to India, which is currently recognized as the world’s fastest-growing major economy.
Goldman Sachs aims to diversify its loan offerings through its shadow banking unit, as revealed by Sonjoy Chatterjee, Chairman and CEO of Goldman in India.
Additionally, the firm plans to obtain a license to expand its presence in currency trading. This move would enable Goldman to engage with various counterparties, including financial investors, equity customers, or corporate clients.
Goldman Sachs, along with other Wall Street lenders and private equity giants, is actively pursuing opportunities in the Indian economy, which is projected to grow by 7% in the year ending March.
India currently hosts Goldman’s largest overseas office, accommodating a diverse workforce from quants to software engineers. Notably, Goldman leads the league table for deals in India this year, as indicated by data compiled by Bloomberg.
On the other hand, China’s President Xi Jinping and China’s top leaders have pledged to prioritize industrial policy as the key economic focus for the upcoming year, disappointing investors anticipating more robust stimulus measures for growth.
The emphasis on supporting companies to manufacture higher-value products, rather than directly stimulating consumer spending, is not expected to have a substantial immediate impact on boosting growth.
US, UK and Europe Approach Divergent Paths
Notably, this week, the Federal Reserve, European Central Bank, and Bank of England opted to keep interest rates unchanged, yet each indicated distinct trajectories for their future policy directions.
US officials are ready to implement interest rate cuts in 2024, contrasting with European counterparts who expressed intentions to accelerate their departure from the pandemic-era stimulus.
In the UK, policymakers adopted a more hawkish stance, with several expressing support for a potential rate hike at the recent Thursday meeting.