Goldman Sachs Expects September Fed Rate Hike

Goldman Sachs now expects the Federal Reserve to raise interest rates by 25 basis points at its September meeting, reversing its previous forecast for no change. The bank said the shift reflects financial-market pricing more than a major reassessment of the economic outlook, with investors assigning roughly an 87% to 90% probability to a hike. Recent inflation data, including a 0.4% monthly increase in August consumer prices and a slightly stronger-than-expected core reading, along with rising oil prices and producer prices, has renewed concern about inflation. Goldman continues to view much of the inflation above the Fed’s 2% target as temporary and says the hike may not necessarily signal the start of a prolonged tightening cycle.