Goldman Sachs and J.P. Morgan expect Fed rate hike in September
Goldman Sachs and J.P. Morgan have revised their forecasts and expect the US Federal Reserve to raise interest rates in September. The expectations were revised after stronger-than-forecast US consumer and producer price data for August, Asharq Al-Awsat reports, citing Reuters.
Bank forecasts
Goldman Sachs on Friday abandoned its previous forecast that rates would remain unchanged. The bank now expects a 25-basis-point increase at the Fed meeting scheduled for September 15–16.
J.P. Morgan forecasts a quarter-percentage-point rate increase in both September and December. The bank’s economists, led by Michael Feroli, said that rising bond yields, energy prices and inflation indicators had made a rate hike at the upcoming Fed meeting more likely than not.
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Inflation and market expectations
According to the report, US consumer and producer prices rose more than expected in August. At the same time, oil prices climbed above $100 per barrel due to the resumption of hostilities in the Middle East. This heightened concerns that inflation’s movement toward the Fed’s 2% target could slow after several months of easing price pressures.
Goldman Sachs economist David Mericle said that, in his view, the Federal Open Market Committee would not want to spring any surprises. J.P. Morgan also raised its estimate of the long-term rate level to 3.25%.
According to the CME FedWatch tool, markets estimate the probability of a 25-basis-point rate hike in September at 87%, compared with around 70% before the latest inflation data were released. Despite expecting an increase this week, Goldman Sachs still forecasts two rate cuts in 2027, but later than previously assumed. The bank believes that the expected September increase is more related to market expectations than to fundamental inflation factors.
