Goldman Sachs Says September Fed Rate Hike ”Very Unlikely” Amid Slowing Inflation and Weaker Economic Data
Goldman Sachs believes that markets are overestimating the likelihood of the US Federal Reserve raising interest rates in the near term, given mounting evidence of slowing inflation and weakening components of economic activity.
Jan Hatzius, Chief Economist at Goldman Sachs, has ruled out an interest rate hike at the upcoming September meeting, characterizing the probability of such a move as "very unlikely".
This assessment comes as markets actively reprice the expected trajectory of US monetary policy. Recent macroeconomic data has prompted investors to delay their expectations for the next interest rate increase. According to Goldman Sachs, current market pricing remains more hawkish than available economic indicators can justify.
US Economic Data Weighs on Tightening Bets
Hatzius based his assessment on a convergence of indicators demonstrating easing pressures across the US economy. Chief among these are softer retail sales, disappointing employment figures, and the continued deceleration of inflation.
These metrics hold particular significance for the Federal Reserve, which must carefully balance controlling inflation against maintaining labor market resilience and broader economic activity. As inflationary pressures gradually subside, raising borrowing costs becomes increasingly difficult to justify—especially as demand and labor market indicators begin to exhibit signs of fatigue.
Hatzius noted that inflation is more likely to improve further rather than deteriorate over time, a perspective that reinforces the bank's stance that market pricing for the federal funds rate remains overly hawkish.
The table below outlines the core economic drivers shaping the bank's revised monetary policy outlook:
Economic Indicator / FactorGoldman Sachs Assessment & Market Impact
September Rate HikeDeemed "very unlikely" by Chief Economist Jan Hatzius.
Market PricingCurrent market expectations for the funds rate are considered too hawkish.
Consumer & Labor DataSofter retail sales and disappointing employment figures point to easing economic pressures.
Inflation TrajectoryMore likely to improve further than deteriorate, making borrowing cost increases harder to justify.
Market Repricing ShiftExpectations for the next 25-basis-point hike have been pushed to January of next year, after being almost fully priced in for December just a week prior.
According to the assessment detailed in the report, markets have already pushed their expectations for the next 25-basis-point hike to January of next year, after having almost fully priced in an interest rate increase for December just a week ago.