Fed Rate Hike Unlikely as Goldman Sachs Downgrades Expectations

Goldman Sachs has downgraded its expectations for a Federal Reserve interest rate hike in September. The investment bank believes that only 4-5 of the 12 voting Federal Open Market Committee members are inclined towards rate hikes, citing weaker jobs and inflation data over the past two months.

The recent economic data shows US retail sales fell in July, partly due to timing effects from Amazon Prime Day. Goldman Sachs attributes this decline to a temporary boost in consumer spending during the spring driven by tax refunds.

According to the bank's estimate, underlying trend job growth slowed to 5,000 in July, below its breakeven level of 50,000. The unemployment rate fell from 4.5% in December to 4.1% in July, but Goldman Sachs attributes this decline to lower labor force participation rather than higher employment.

Core personal consumption expenditures inflation is expected to be 0.20% in July, with more than half of the gain coming from portfolio management services, a category Goldman Sachs considers poorly measured and likely to face downward revisions at the end of September.