Years of discussing when and how the Federal Reserve will raise interest rates probably isn't going to prevent market participants from being caught offguard, Goldman Sachs Group Inc President Gary Cohn said.
“We’re probably less ready than people think,” Cohn said on a podcast posted Wednesday on the firm's website. “It won’t at all be surprising to me if there are some interesting market reactions based on official change in rate policy by the Fed.”
Economists estimate the US central bank will begin raising its benchmark target in September, after six years of near-zero rates. Cohn cited quantitative easing in the US and Europe as examples of macro economic events that were long expected and still caused market swings when announced.
“When it does happen, it’s usually not the first-derivative event that people are caught off guard by,” Cohn said. “They’re caught offguard by the second-third- and fourth-derivative events. It’s ‘Oh, yeah, when interest rates go up, that happens.’”
Goldman Sachs, one of the largest global trading banks, posted a 12 per cent jump in fixed-income revenue in the first three months of the year. Chief Financial Officer Harvey Schwartz said that period “was dominated by one primary theme, central bank policies.”
Most corporate clients have already taken advantage of low interest rates by issuing debt and raising capital, Cohn said.
