Goldman Sachs shifts to Fed rate-hike forecast after August inflation data

  • Goldman Sachs forecasts a 25-basis-point Federal Reserve rate increase in September.
  • CME FedWatch showed 86.2% odds of a September rate increase on Sept. 14.
  • Goldman raised its August core PCE inflation estimate to 0.26% month-on-month.

Goldman Sachs expects the Federal Reserve to raise its benchmark rate by 25 basis points at its September meeting, reversing its earlier forecast for no change. The bank raised its estimate for August core Personal Consumption Expenditures inflation to a 0.26% monthly increase after Consumer Price Index data, while keeping its underlying inflation outlook unchanged. CME FedWatch showed an 86.2% probability of a rate increase on Sept. 14. James Thorne, chief market strategist at Wellington-Altus, said a hike would be aimed at calming Wall Street rather than addressing a material inflation shift, arguing that tighter policy would weaken demand, investment, employment and household purchasing power. He cited wage growth of 3.1% from a year earlier and said there was no evidence of a wage-price spiral or wider inflation transmission from energy prices.

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