Goldman Sachs still thinks Fed rate hikes far off

US VIEW: Goldman Sachs says it still thinks that Fed rate hikes are far off.

Jan Hatzius at GS writes: "First, we do not think that Yellen meant to send a strong signal of a shift in the reaction function. Second, while we agree that the most likely path for growth is a pickup to a 3%+ pace, the risk to this forecast is on the downside. Third, we expect a more gradual return to 2% inflation than the FOMC. Fourth, we see a significant risk that a tightening of financial conditions in the run-up to the first rate hike will delay the first hike, much as last summer's "taper tantrum" delayed the actual move to QE tapering."

GS central forecast for the first hike remains early 2016, although the risks now tilt in the direction of a slightly earlier move, "mainly because of Yellen's smaller-than-expected appetite for tolerating an inflation overshoot and her own apparent 2015 lift-off projection."