In a note published Monday morning, Goldman Sachs economist David Mericle forecast the Federal Reserve will not lift interest rates at this week’s meeting due to banking system stress. “While policymakers have responded aggressively to shore up the financial system, markets appear to be less than fully convinced that efforts to support small and midsize banks will prove sufficient,” he said in a note to clients. Mericle said the link between a single quarter-point hike and future inflation is “very tenuous” and that the Fed can get back on track with hikes very quickly. The bank is still expecting quarter-point increases in May, June and July. The yield on the 2-year Treasury fell 6 basis points to 3.77%.
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