Goldman calling for a pause in hikes

GS is calling for a pause in hikes (shared by Fed whisperer Nick Timiraos on Twitter).

Nick Timiraos @NickTimiraos

Goldman Sachs: “In light of recent stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March.”

GS is the first major bank calling for a pause, which was an unlikely outcome for the market prior to this weekend. Jun 23 SOFRs jumped from 94.83 to 94.95 on the tweet. Goldman’s call shifts the market’s Overton window on the path of Fed hikes and makes a pause much more likely. One caveat is that JPM disagrees, and a Fed pause is still an outlier view.

A pause would potentially result in all 50 bp of hikes priced into the market to be removed. This would be a large move for rates and would have implications across all asset classes. Of course, a hot CPI tomorrow could derail this, but the balance of risks now skew sharply towards a pause in the hiking cycle.