Goldman Sachs Expects 25 Basis Point Interest Rate Hike

Goldman Sachs has revised its expectations for the US Federal Reserve’s interest rate decision, now anticipating a 25-basis-point rate hike at its meeting beginning tomorrow, after previously forecasting a hold.

With this shift, Goldman Sachs joins JPMorgan, which also expects a quarter-point rate increase in September, followed by another hike of the same magnitude in December.

The change in outlook follows data showing that US consumer and producer prices rose more than expected in August, coinciding with oil prices climbing above $100 per barrel. This has revived concerns about persistent inflationary pressures and the potential for inflation to remain above the Fed’s 2% target.

However, Goldman Sachs clarified that its revised forecast was driven primarily by market pricing rather than a significant change in its fundamental economic outlook. It noted that the Fed may hesitate to surprise investors with a hold, given that markets are now heavily pricing in a rate increase.

Markets currently assign an approximately 87% probability to a 25-basis-point rate hike this month, up from around 70% before the latest inflation data was released.

JPMorgan, meanwhile, argues that the recent data raises doubts about the continued disinflationary trajectory, leading it to forecast two rate hikes for the remainder of the year. It also raised its long-term neutral interest rate estimate to 3.25%.

Despite shifting its near-term forecast to anticipate a rate hike this week, Goldman Sachs still expects two rate cuts in 2027, albeit at a later timing than previously projected.

Meanwhile, US President Donald Trump reiterated that the United States should pay the lowest possible interest rates on its sovereign debt globally, citing the country’s creditworthiness and economic strength.