Goldman Sachs called a September Federal Reserve interest-rate increase very unlikely, arguing that market expectations for future rate increases remain too aggressive as inflation continues to ease. Chief economist Jan Hatzius made the call in a note published Sunday, citing sluggish retail sales, lackluster jobs numbers, and decelerating price pressures as grounds for skepticism that the Federal Open Market Committee would act at its Sept. 15-16 meeting. Hatzius wrote that Goldman's baseline forecasts point to further improvement in inflation rather than a renewed deterioration, and that market pricing for the funds rate is still too hawkish. CME FedWatch data put the odds of a 25-basis-point increase to the 3.75%–4% target range at around 30% heading into the September meeting, with market participants now pointing to January for the next hike after July inflation data came in lower than anticipated. Goldman also flagged that the U.S. Treasury yield curve is positioned to steepen, a move the bank attributed to cooling price pressures, diminishing rate-hike expectations, and mounting concerns over the fiscal outlook.
Goldman Sachs Group IncGoldman's chief economist argues a September Fed hike is very unlikely, which is positive for Goldman's trading and investment banking activities as it implies lower rates and a steeper yield curve.
