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The Federal Reserve is likely to only increase interest rates three times this year, skipping a hike at its March meeting, Goldman Sachs said, revising its previous forecast for four hikes.

Goldman believes that the Fed may not hike until June although it noted that rates could still be lifted in April if market conditions improve significantly.

Activity seems to suggest modest expansion, Goldman said, but it noted that some data are signaling a slowdown early in the year.

It cited the ISM non-manufacturing index for January, which provides a reading on the services sector. The index fell to 53.5 in January, from 55.8 in December, below expectations of 55.1 from a Reuters poll. A reading above 50 indicates expansion.

That followed the ISM index for the manufacturing sector falling for a fourth straight month, with factory activity index rising to 48.2 from 48.0 in December.

"Risks are tilted to the downside—it is still easier to see the committee slowing down the rate of increases then speeding them up," Goldman said.

Reference: CNBC