Goldman Sachs no longer expects the Fed to hike rates in March, cites stress on banking system

Goldman Sachs nary longer sees a lawsuit for the Federal Reserve to present a complaint hike astatine its gathering adjacent week, citing "recent stress" successful the fiscal sector.

Earlier Sunday, U.S. regulators announced measures to stem contagion fears pursuing the illness of Silicon Valley Bank. Regulators besides closed Signature Bank, citing systemic risk.

"In airy of the accent successful the banking system, we nary longer expect the FOMC to present a complaint hike astatine its adjacent gathering connected March 22," Goldman economist Jan Hatzius said successful a Sunday note.

The steadfast had antecedently expected the Federal Reserve to hike rates by 25 ground points. Last month, the rate-setting Federal Open Market Committee boosted the national funds complaint by a 4th percent point to a people scope of 4.5% to 4.75%, the highest since October 2007.

Goldman Sachs economists said the bundle of alleviation measures announced Sunday stops abbreviated of akin moves made during the 2008 fiscal crisis. The Treasury designated SVB and Signature arsenic systemic risks, portion the Fed created a caller Bank Term Funding Program to backstop institutions deed by marketplace instability pursuing the SVB failure.

"Both of these steps are apt to summation assurance among depositors, though they halt abbreviated of an FDIC warrant of uninsured accounts arsenic was implemented successful 2008," they wrote.

"Given the actions announced today, we bash not expect near-term actions successful Congress to supply guarantees," the economists wrote, adding that they expect the latest measures to "provide important liquidity to banks facing deposit outflows."

Goldman Sachs added that they inactive expect to spot 25 ground constituent hikes successful May, June and July, reiterating their terminal complaint anticipation of 5.25% to 5.5%.

— CNBC's Michael Bloom, Jeff Cox contributed to this post