Goldman Sachs Joins JPMorgan in Expecting Fed Rate Hike

Goldman Sachs has shifted its forecast, now predicting a September rate hike by the US Federal Reserve. The bank's change of heart comes after stronger-than-expected inflation readings and rising oil prices. These developments have led many forecasters to turn more hawkish, with Goldman Sachs joining JPMorgan in expecting interest rates to rise.

The latest data show that US consumer and producer prices rose more than expected in August, while oil prices climbed above $100 a barrel due to renewed hostilities in the Middle East. This has revived concerns that progress towards the Fed's 2% inflation target could stall after months of moderation.

Goldman Sachs economist David Mericle notes that the Federal Open Market Committee (FOMC) will be reluctant to surprise, implying that a rate hike is likely this week. JPMorgan economists led by Michael Feroli struck a similarly hawkish tone, citing rising bond yields and energy prices as factors contributing to their forecast.

Markets are pricing in an 87% chance of a quarter-point Fed rate hike this month, up from about 70% before the latest inflation data. Goldman Sachs still expects two Fed rate cuts in 2027, though later than previously forecast, as it sees this week's expected hike as driven more by market pricing than inflation fundamentals.