Rate Hike or Cut: Goldman vs Citi on Fed Decision Impact

Goldman Sachs Vice Chair Robert Kaplan recently expressed his support for another interest rate hike by the Federal Reserve, suggesting that the current rate of 3.75% is near neutral. In contrast, Citi head of Asia strategy Rohit Garg believes that the Fed should cut rates three times starting in October, citing mixed inflation data and cooling wage growth.

The core PCE, the Fed's preferred inflation gauge, rose 0.2% in July from June, which Kaplan sees as a reason to maintain restrictive monetary policy. However, Citi's Garg notes that wage growth has cooled, with average hourly earnings for private employment reaching $37.62 in July, up from $37.15 in January.

This divergence of opinions highlights the importance of considering both sides of the argument when making financial decisions. For retirees or near-retirees holding more than 12 months of expenses in cash, a two- to five-year CD ladder or a short- to intermediate-term Treasury ladder may be worth evaluating against a high-yield savings account.