Goldman Sachs Backs 25bp Fed Rate Hike After August Inflation

Goldman Sachs revised its macroeconomic projections to anticipate a 25-basis-point interest rate increase at the Federal Reserve's September 16 FOMC meeting, following hotter-than-expected August inflation data.

The adjustment by the financial institution aligns with shifting market expectations and reflects lingering price pressures across the broader U.S. economy, according to a report from Investing.com.

"Goldman Sachs expects the Federal Reserve to raise interest rates by 25 basis points at its September 16 FOMC meeting without signaling additional hikes ahead," analysts noted in the bank's revised policy outlook.

CPI Data Drives Policy Revisions

The shift in the bank's monetary policy trajectory follows the release of August consumer price figures. According to data covered by Crypto.news, the U.S. Consumer Price Index increased 0.4% in August after seasonal adjustment.

On an annualized basis, headline inflation remained at 3.4% over the preceding 12 months, while core CPI rose 0.3% for an annual rate of 2.4%. These readings outpaced consensus expectations and prompted an immediate repricing in derivatives markets.

Interest-rate futures assigned an 87% probability to a September hike immediately following the August consumer price inflation release, shifting away from earlier expectations of a prolonged monetary pause.

Terminal Rate and 2027 Projections

Beyond the immediate September meeting, Goldman Sachs updated its longer-term rate path and expected easing cycle. The bank raised its terminal rate forecast to a range of 3.25% to 3.5%, up from its previous projection of 3.0% to 3.25%.

In addition, the institution adjusted its anticipated timeline for monetary easing. The firm now projects two rate cuts in 2027, slated for September and December, moving away from earlier models that anticipated reductions in June and December of that year.

Market Performance and Bank Shares

Amid the broader macroeconomic recalibration, shares of Goldman Sachs Group Inc (GS) traded higher during the market session. The stock was quoted at $951.47, marking a 1.44% increase from its previous close of $937.98, according to Finnhub market data.

The revised rate forecasts highlight ongoing challenges for central bankers as they attempt to balance persistent labor market strength and stubborn consumer price growth against the risk of an economic slowdown.