Goldman Sachs Flips Fed Forecast: Rate Hike Now Expected

Goldman Sachs has made an unexpected change to its forecast for this week's Federal Reserve meeting, now expecting a 25-basis-point rate increase after previously forecasting no change.

The shift follows a sharp repricing in markets after firmer inflation data and another surge in oil. The bank did not materially revise its underlying inflation outlook, but concluded that with investors already pricing an almost certain hike, the Fed would be reluctant to surprise markets with a pause.

This could risk sending long-term Treasury yields sharply higher and raise questions about the central bank's inflation credibility.