Goldman Sachs reverses course, now expects a September Fed rate hike

In a note to clients, Goldman Sachs said it had reversed its previous forecast, according to which rates would remain unchanged, and now expects a 25-basis-point (0.25 percent) increase at the September meeting. According to the bank, this shift in stance was driven less by the economic outlook and more by pricing in financial markets, where investors largely expect monetary tightening.

Expectations were reinforced after Friday’s U.S. inflation report, which came in hotter than expected: the core consumer price index (CPI) rose 0.3 percent on a monthly basis and 2.4 percent on an annual basis, while headline inflation reached 3.4 percent. Markets are now pricing in about an 86 percent chance that the Fed will raise rates by 25 basis points on Wednesday.

If confirmed, it would be the Fed’s first interest-rate increase since mid-2023. The U.S. central bank has kept its benchmark rate in the 3.50–3.75 percent range throughout this year, while chairman Kevin Warsh struck a hawkish tone at the Jackson Hole symposium in August.

JPMorgan also expects rate hikes, both in September and in December, aligning with rising expectations on Wall Street for a new cycle of monetary tightening.

Source: Reuters