Goldman Sachs says if the Fed nails a soft landing, don't expect interest rate cuts until something goes wrong

Goldman says the Fed won't cut interest rates until something goes wrong.

The note came after the Fed hiked the benchmark interest rate for the third time in a row. The data showed that prices went beyond what was expected.

Some, like "Bond King" Jeff Gundlach, have urged officials to slow down on the pace of rate hikes in order to stop the US economy from going into a recession.

A soft landing is when inflation falls to the Fed's 2% target and the economy doesn't go into a recession. Goldman says that the Fed is unlikely to cut interest rates if this scenario is achieved.

According to analysts led by Jan Hatzius, if the inflation problem is solved without a recession, the Fed will most likely wait until something goes wrong to cut rather than cutting just for the sake of returning to neutral.

The fed funds rate is expected to rise to 4.6% by the end of the year according to analysts at the bank. Two issues will affect the path of the funds rate in the years to come.

Growth, hiring and inflation are the first things that come to mind. There are risks in both directions, but we believe that a higher peak rate is needed to reverse overheating.

The second question is whether the participants of the Federal Open Market Committee will be willing to slow or stop raising the funds rate if inflation remains uncomfortably high.