Goldman Sachs has warned of a possible series of interest rate hikes in the U.S. as early as September
Goldman Sachs believes that if inflation in the U.S. remains high through the fall, the Fed may begin raising interest rates as early as a couple of months from now
The Fed May Raise Rates in September: Rob Kaplan Warned of Inflation Risks / Photo: Dominik Nass / Shutterstock
The U.S. Federal Reserve (Fed) may need to raise interest rates as early as September if inflation remains high, according to Rob Kaplan, vice chairman of Goldman Sachs and former president of the Federal Reserve Bank of Dallas. Bloomberg reports his opinion.
“If inflation rates do not decline by September, I believe the balance of risks suggests that it would be appropriate to take certain measures—either in September or later this fall. That would be a more prudent step,” Kaplan said in an interview with Bloomberg TV.
If inflation remains stable through the fall, it will indicate that U.S. monetary policy is still too accommodative, he added. At the same time, the Fed’s monetary policy moves are rarely one-off actions, Kaplan noted, emphasizing that rate adjustments most often occur in a series of two or three steps. “So I think that if the Fed takes this step in September, we need to be prepared—it could be followed by one or two more [rate hikes],” noted the vice chairman of Goldman Sachs.
Nevertheless, Kaplan urged people not to read too much into the Fed’s latest dot plot, which indicates that the median forecast for the federal funds rate at the end of 2026 is 3.75%. According to him, the Fed may not have taken into account the agreement between the U.S. and Iran, as well as the resumption of shipping routes. The forecast may change by September, when the Fed publishes its next set of macroeconomic projections, the expert believes. “If I were still in my previous position [as president of the Federal Reserve Bank of Dallas], I would urge caution in interpreting this forecast chart, because we’ve just seen significant changes [in geopolitics], and I want to give them a chance to play out,” Kaplan added.
What Other Analysts Are Saying
On June 18, Citigroup shifted its expectations regarding the U.S. Federal Reserve’s first interest rate cut from September to October, citing the U.S. regulator’s “hawkish” stance, Reuters reports. Citi, which for a long time was a “dove” on the Fed among the largest brokerage firms, now forecasts rate cuts of 25 basis points in October and December 2026, followed by another cut in January 2027.
The brokerage firms Nomura and BofA, which had not anticipated a policy easing by the Fed, stated that following the release of the “hawkish” forecasts, the risk of interest rate hikes this year is increasing, the agency reports.
Barclays analysts, who had previously forecast a 25-basis-point interest rate cut in March 2027, now expect the U.S. central bank to keep rates unchanged over the next year.
On the eve of the Fed meeting, market maker Citadel Securities stated that there is a growing likelihood that the U.S. Federal Reserve will begin a series of interest rate hikes as early as September.
Context
On June 17, the U.S. central bank left its benchmark interest rate unchanged for the fourth consecutive time—at 3.5–3.75%. And the new Fed Chair, Kevin Warsh, made it clear that the U.S. central bank remains focused on fighting inflation. This “hawkish” stance was also confirmed by the forecasts of individual Federal Reserve members, half of whom expect interest rates to rise by the end of this year. Against this backdrop, traders began selling off short-term U.S. Treasury bonds, which triggered a rise in yields on some of them, Bloomberg notes. The yield on two-year U.S. Treasury bonds—which is most sensitive to changes in monetary policy—rose by 17 basis points on Wednesday, June 17, marking the sharpest increase since March.
Traders in the swap market are currently pricing in a quarter-percentage-point increase in the U.S. interest rate by October, whereas before this week’s Fed meeting, expectations were centered on March 2027, according to Bloomberg.
According to data for May, the Consumer Price Index (CPI) in the U.S. rose 4.2% compared to the same period last year. This is the sharpest increase in the index since April 2023. The core CPI, which excludes volatile energy and food prices, rose 2.9% year-over-year, compared with a 2.8% increase in April. The Federal Reserve’s target is 2%.
This article was AI-translated and verified by a human editor
