Goldman Sachs Expects 25 Basis-Point Rate Hike Following September FOMC Meeting

Goldman Sachs has revised its prediction for the upcoming Federal Reserve meeting, now expecting a 25 basis-point interest rate hike. The banking giant initially stated it did not anticipate any change in rates following the September 15-16 Federal Open Market Committee (FOMC) meeting. However, after reviewing August's inflation data, Goldman Sachs adjusted its forecast.

The US Consumer Price Index (CPI) rose 0.4% in August, with headline inflation remaining steady at 3.4% over 12 months. Core CPI increased by 0.3%, but its annual rate declined from 2.5% to 2.4%. Economists argue that the service sector numbers were strong, despite core PCE inflation potentially rising.

Diane Swonk, chief economist at KPMG, estimates that services excluding housing rose 0.5% in August and 3% over one year. She also expects a 25 basis-point rate hike, which would lift the target range from 3.50%-3.75% to 3.75%-4%. However, James Thorne, chief marketing strategist at Wellington-Altus, questions Goldman Sachs' revised position, stating it likely reflects market expectations rather than a changed inflation outlook.