(Bloomberg) -- Goldman Sachs Group Inc. Chief Executive Officer David Solomon said there’s still a chance that the Federal Reserve could opt for a bigger rate cut than expected because of emerging signs of weakness in the employment market.
“There’s a case to be made for 50 based on more softening in the labor market,” Solomon said in a CNBC interview Wednesday, referring to the potential for a cut of 50 basis points by the US central bank rather than a more standard-sized 25-basis-point move. “I think the percentage chance is in the low 30s.”
Solomon said his best guess is they’ll probably go with a quarter-point cut but the Fed could bring down the rate two or three times through year end. The 62-year-old banker was predicting as recently as May that there may be no rate cuts in 2024 even as he said that a soft landing is still the most likely outcome.
Traders are rallying around the likelihood of a quarter-point cut next week after the most recent data on Wednesday showed an unexpected pickup in underlying US inflation. The consumer price read for August mostly eliminated the case for a bigger half-point rate reduction. Fed officials have identified a weakening labor market as a reason to push for a faster pace of easing in the coming months.
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