Goldman Sachs has thrown in the towel on the likelihood of interest rate cuts by the Fed in 2007. The New York investment dealer said Tuesday morning that it has abandoned its forecast that the U.S. central bank would chop its benchmark federal funds rate, currently at 5.25 per cent, by 75 basis points this year, starting with its September policy-setting meeting. Goldman economists said that even though real economic growth has slowed as anticipated, "the absence of any tangible evidence of rising unemployment makes it unlikely that Fed officials will cut the funds rate target." But they still figure there may be slightly more reason for Fed chairman Ben Bernanke to lower rates than raise them down the road. "Early 2008 strikes us as the most likely time for such a move to commence, but our confidence in this outcome is low enough that we have elected to remove all easing from our baseline forecast," the economists said in a note.
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