Goldman Sachs has pushed back its forecast for the next Fed rate hike to December
The bank adjusted its timeline following inflation data that came in below forecasts
The Fed raised interest rates at its September meeting for the first time in three years / Photo: surprisestock/Shutterstock.com
Goldman Sachs, one of Wall Street’s largest banks, has pushed back its expectations for the next U.S. Federal Reserve interest rate hike from October to December 2026 after inflation data came in below forecasts, according to Reuters. The bank had previously expected a 25-basis-point rate hike in October.
Details
"We are postponing the second rate hike in our forecast until December and see a high probability that the FOMC will ultimately conclude that further rate hikes are inappropriate," according to a Goldman Sachs note published on Wednesday.
The revision was prompted by the Personal Consumption Expenditures (PCE) price index—the Fed’s preferred measure of inflation. In August, it rose 3.4% year-over-year, while economists surveyed by Reuters had forecast an average of 3.7%. On September 29 (prior to the CPI release), John Williams, president of the Federal Reserve Bank of New York, said that the central bank has time to assess the incoming data before deciding on its next move.
According to the CME Group’s FedWatch tool, the probability of a quarter-percentage-point rate hike in October is currently estimated at about 36%, down from 51% the previous day and nearly 69% a week ago. Market participants are now awaiting the release of the key U.S. nonfarm payrolls report for September, which is due out on Friday.
Context
The Fed raised rates in September—for the first time in three years and for the first time under the leadership of the regulator’s new chair, Kevin Warsh, who explained the decision as necessary to combat inflation. The decision was unanimous. In addition, the median forecast published by the Fed suggested another rate hike before the end of the year. Analysts had mixed views on the outlook: some speculated that the September move might be a one-off, while others warned of the possibility of a series of rate hikes.
Back in August, Goldman Sachs noted that the market was overestimating the likelihood of further Fed policy tightening: At the time, the bank’s chief economist, Jan Hatzius, called a rate hike at the September meeting “extremely unlikely” given weak data on retail sales and employment, as well as slowing inflation.
This article was AI-translated and verified by a human editor
