Goldman Sachs moved its forecast for a second Federal Reserve rate hike this year from October to December after August inflation came in below expectations. Core PCE inflation was reported at 3.0% year over year, compared with a 3.3% market forecast, while headline PCE inflation was 3.4%, below the expected 3.7%. Monthly PCE inflation rose 0.3%, and core PCE increased 0.2%. Earlier figures had shown monthly core PCE at 0.25% and annual inflation at 3.01%, partly reflecting methodological revisions to portfolio management data. Goldman Chief Economist Jan Hatzius also cited comments from New York Fed President John Williams, who said policy was in a good place and should proceed carefully. Goldman now sees a strong possibility that the FOMC will decide another rate increase in 2025 is unnecessary and forecasts fourth-quarter core PCE inflation at about 3.0%, below the Fed officials’ 3.4% median estimate. At the same time, inflation-adjusted consumer spending rose 0.6% in August, its strongest monthly increase since March 2025, and second-quarter economic growth was revised to 2.2% from 1.5%. Markets priced a 65% chance of no October policy change and about a 31% chance of a 25-basis-point increase, while CME FedWatch previously indicated roughly a 35% probability of a December hike. The outlook will be tested by employment data, September CPI and the October FOMC meeting.