Goldman Sachs pushes Fed rate hike forecast to December

Goldman Sachs has adjusted its forecast for the next US interest rate hike, now predicting it will occur in December. This shift comes after a less dramatic inflation reading than expected, which reduced hopes for another Federal Reserve rate hike in October. Previously, Goldman had forecast a 25-basis-point increase for October.

The brokerage now believes there is a strong likelihood that the Federal Open Market Committee (FOMC) will ultimately decide that further rate hikes are not needed. The Federal Reserve raised interest rates in September for the first time in three years, under the leadership of new Chairman Kevin Warsh, with the aim of combating inflation.

Inflation data released on Wednesday indicated that US inflation increased by 3.4% on an annual basis in August, lower than the 3.7% estimate from economists surveyed by Reuters. Just a day prior, John Williams, the President of the Federal Reserve Bank of New York, stated that the central bank had ample time to consider the data before making a decision on the timing of the next rate hike.

Currently, rate futures markets indicate a 38% chance of a quarter-percentage-point rate increase in October, down from roughly 51% the previous day and nearly 71% a week earlier. Market participants are closely watching the upcoming US nonfarm payrolls report for September, scheduled to be released on Friday.