Goldman Sachs Flips to Rate Hike as Bitcoin Stalls Under $80,000
Goldman Sachs has reversed its stance on interest rates, now predicting a 25-basis-point hike next week. This decision follows a hotter-than-expected inflation print that pushed odds above 86%. The August core CPI rose 0.3% month-on-month, exceeding the 0.2% consensus.
The CME Fedwatch tool initially had a 69% probability of a quarter-point increase, but this figure surged to 86.5% by the end of the session and has since drifted toward 90%. Other institutions, including JPMorgan and Citigroup, have also landed on the same side.
The signal for rate hikes has been confirmed by the market's reaction to inflation data. Bitcoin's price has stalled under $80,000, coinciding with hawkish repricing. While some analysts had argued that monthly core inflation would soften enough for officials to tolerate above-target annual readings, Goldman Sachs now expects a hike.
The bank's chief U.S. economist, David Mericle, and his team have revised their expectations. They now expect the Federal Open Market Committee (FOMC) to deliver a quarter-point increase when its two-day meeting concludes on Sept. 16, lifting the federal funds target from its current 3.50% to 3.75% range.
The question of what comes after the rate hike is more consequential than the print itself. Almost no one at the central bank believes a single 25-basis-point increase does much on its own to curb inflation, which is precisely why a hike next week would signal that officials view current rates as too low and may act again.