Goldman Sachs: "Fed to Hike Rates in October"... Outlook Shifts on Hawkish Signals

Goldman Sachs: "Fed to Hike Rates in October"... Outlook Shifts on Hawkish Signals

Goldman Sachs changed its forecast, now expecting the U.S. Federal Reserve (Fed) to further raise its benchmark interest rate by 0.25 percentage points in October, following hawkish signals from the Fed.

According to Reuters on the 17th, Goldman Sachs stated that a majority of members in the Fed's new interest rate projections anticipated additional rate hikes within the year, presenting 'two hikes' this year as the base scenario.

This reverses its previous stance that the tightening cycle would end with the September hike.

The Fed raised the benchmark interest rate by 25 basis points (1bp = 0.01 percentage point) to 3.75-4.00% on the 16th. This is the first hike in three years since 2023.

Goldman Sachs evaluated the meeting as more hawkish than expected, citing the upward revision of members' interest rate projections and Chairman Kevin Warsh's repeated explanation that this action merely "removed some degree of accommodation."

According to the CME FedWatch Tool, the interest rate futures market on this day reflected a 52.0% probability of an additional hike in October, surpassing the probability of a freeze (48.0%). The probability of a hike, which was only 17.6% a week ago, rose sharply.

Prior to Goldman Sachs' revised forecast, Bank of America (BofA) is predicting a more aggressive tightening path, expecting a total of three hikes this year (75bp including September), with consecutive hikes in October and December. Deutsche Bank also expects three hikes.