Goldman Sachs Reverses Course, Now Sees Another Fed Rate Hike In October
By CU Today Staff —
WASHINGTON—Goldman Sachs now expects the Federal Reserve to raise interest rates again in October, reversing its previous forecast of just one rate increase this year after policymakers signaled they may need to tighten monetary policy further to bring inflation back to target, Reuters reported.
The revised forecast calls for another 25-basis-point increase at the Fed’s October meeting, following Wednesday’s quarter-point hike that lifted the federal funds target range to 3.75% to 4%. Reuters reported the Fed’s latest projections showed a 16-2 majority of policymakers expect at least one additional increase this year, while four officials anticipate two more hikes.
Goldman said policymakers appear increasingly focused on returning inflation to the Fed’s 2% target more quickly, leading its economists to conclude October is the most likely time for another move, according to Reuters. Morgan Stanley and Macquarie also added a March 2027 rate increase to their forecasts, on top of previously expected December hikes, while Bank of America Global Research expects increases in both October and December.
Financial markets also shifted toward expectations for additional tightening following the Fed decision. Reuters reported traders were pricing in about a 53% chance of an October rate increase and an 81% probability of a December hike, based on CME FedWatch data. The changing outlook comes as oil prices have climbed above $100 a barrel and recent economic data have continued to show resilient growth, adding to concerns that inflation could remain persistent.
Originally reported by CU Today.