Goldman Sachs Predicts 25-Basis-Point Rate Hike by Federal Reserve in September

Goldman Sachs has adjusted its forecast for the US Federal Reserve's rate hike, anticipating a 25 basis point increase at its September meeting. This shift aligns with growing consensus on Wall Street regarding further policy tightening, driven by ongoing inflation concerns.

The brokerage's revised outlook was announced in a note released on Friday, indicating a pivot from its earlier view that rates would remain unchanged. This adjustment stems from market pricing trends suggesting a high likelihood of a rate hike and an inferred desire by policymakers not to unsettle investors with an unexpected pause.

Market expectations have increased sharply following recent stronger-than-anticipated US producer price data and a climb in oil prices surpassing $100 per barrel, reigniting inflation fears. The FedWatch Tool by CME reports a significant jump in market expectations of a quarter-point rate hike to 87%, up from around 70% prior to new data releases.