Goldman Sachs and JPMorgan Predict Fed Rate Hike in September

US inflation data released last week showed stronger-than-expected price pressures, prompting Goldman Sachs and JPMorgan to revise their forecasts for a Federal Reserve interest rate hike. The investment banks now expect a 25-basis-point increase at the FOMC meeting on September 15-16. This shift in expectations reflects concerns that the decline in inflation towards the Fed's 2% target could stall again.

JPMorgan expects one additional rate hike this year and has raised its estimate for the long-term policy rate to 3.25%. The bank also expects a rate hike in December, predicting a 25-basis-point increase at both meetings. Goldman Sachs economist David Mericle said that 'we think the FOMC will be reluctant to surprise', indicating a cautious approach.

The market is pricing in an 87% probability of a 25-basis-point hike, according to the CME FedWatch Tool, up from around 70% before the latest inflation data were released. Goldman Sachs still sees room for monetary easing in 2027, maintaining its forecast for two rate cuts next year.