On Thursday, in “Fade The Fed,” I suggested it might be time to… well, time to fade the Fed.

I offered some intelligent-sounding commentary, but the basic premise was straightforward: Too often, the Fed’s wrong about the economy and, therefore, about where Fed funds will ultimately end up.

So, the Fed can be a contrarian indicator vis-à-vis the Fed. I sympathize: Up until about seven years ago, I was likewise a contrarian indicator vis-à-vis myself.

Being habitually wrong about your own medium-term trajectory isn’t a situation you want to be in. Over time, that’s a good way to accumulate a trust deficit with the rest of humanity. Turning things around requires a lot of humility, and although I actually do believe Jerome Powell to be a relatively humble soul (albeit far from humble in terms of means), I’m not so sure about the Fed as an institution.

But, for now anyway, the Committee has some buy-in for their preferred “higher for longer” narrative. On the “off” chance I’m wrong, where in this case that means the Fed does manage to keep rates higher for longer, and fading that is a fool’s errand (akin to “fighting the Fed,” always a fool’s errand), it’s worth considering Goldman’s take.

Their house call for the onset of Fed cuts is now Q4 of next year, pushed back from Q2. “We have long had mixed feelings about the likelihood of cuts because we are skeptical of some of the arguments that FOMC participants have made for them,” the bank’s David Mericle said, adding that (and this a real quote), “we think the more natural path to normalizing the funds rate is to simply wait until something goes wrong.”

So, if it ain’t broke, don’t cut it. Or something.

Below, find additional excerpts from Goldman’s post-FOMC recap which, again, I present as a kind of counterpoint to my contention that even if the Fed manages to avoid cuts early next year, September might’ve marked “peak higher for longer,” at least in terms of macro-policy narratives.

Via Goldman:

We did not take a strong signal from the dots about a possible hike in November and we continue to expect that the FOMC will ultimately decide not to hike again in 2023. One reason to downplay the 2023 dots is that participants likely saw strategic value in showing another hike for now because it is simpler to take it out later than to take it out now and have to add it back.

We do, however, think [September’s] meeting raises the bar for rate cuts next year, and we have pushed the first cut in our forecast back from 2024Q2 to 2024Q4. We have long had mixed feelings about the likelihood of cuts because we are skeptical of some of the arguments that FOMC participants have made for them. We are skeptical that neutral is as low as Fed officials think, that the gap between the funds rate and its estimated neutral rate is a good way of forecasting the economic outlook, that there are long-lagged effects of past tightening on GDP growth that will extend even into next year, and that a decline in backward-looking realized inflation — as opposed to forward-looking inflation expectations, which should hold steady — will raise real rates and weaken the economy. Instead, we think the more natural path to normalizing the funds rate is to simply wait until something goes wrong and then deliver either small cuts in response to a smaller growth threat, similar to the insurance cuts of 2019, or substantial cuts in response to a full recession.

Because of our skepticism of the rationales for cuts, we have long assigned only slightly more probability weight to a baseline path featuring cuts than to a path in which the FOMC instead holds the funds rate steady. [September’s] meeting reinforced our hesitation about possible cuts because the FOMC appeared to move away from at least one of the arguments for them, the concern that long-lagged effects of past rate hikes could weigh on growth next year if they are not reversed. If FOMC participants move further toward our view that cuts are not necessary, they could conclude next year that if growth remains solid and the labor market remains tight, rate cuts are not worth the risk.