Warsh's Hawkish Tone May Not Be Enough for Rate Hike, Goldman Sachs Says

Goldman Sachs chief economist Jan Hatzius believes that Federal Reserve Chairman Kevin Warsh's recent hawkish remarks at Jackson Hole may not be enough to prompt a rate hike in September. According to Hatzius, Warsh's speech was the most hawkish he has made as chairman so far, with a focus on getting underlying inflation back to the Fed's 2 percent target at sufficient speed.

Warsh acknowledged that recent PCE and CPI readings were better than expected but argued they do not yet indicate a meaningful improvement in underlying price trends. Hatzius notes that this framing leaves the door open to a September hike, but only if the upcoming August CPI and PPI reports surprise to the upside.

Goldman's own forecast suggests that this bar will not be cleared, with core CPI and core PCE inflation expected to print around 0.2 percent for August. On this basis, Goldman continues to expect the FOMC to hold rates steady at its September meeting.