Market Expectations for Fed Rate Hikes Too Aggressive: Goldman Sachs

Goldman Sachs' Chief Economist Jan Hatzius believes that market expectations for further Fed rate hikes are too aggressive. In a research report released on August 16, he stated that investors are pricing in an overly hawkish federal funds rate.

Market expectations had shifted towards a December hike just a week ago, but have since pushed back to January next year. However, Hatzius assesses that this adjustment has not gone far enough.

The weakening retail sales and soft employment data, compounded by a continued slowdown in inflation, make a September Fed rate hike extremely unlikely, according to Hatzius. The report points out that the inflation outlook is more likely to improve further rather than deteriorate.