Goldman Sachs: A September rate hike by the Fed is almost ruled out — the market is overestimating the risks.
Goldman Sachs analysts have concluded that current market expectations regarding further tightening of the U.S. Federal Reserve's monetary policy are excessively inflated. Against the backdrop of a steady slowdown in inflation to 4% on an annual basis, the probability of a key rate hike at the September meeting is assessed as extremely low. The bank's chief economist, Jan Hatzius, directly calls such a scenario "almost improbable," pointing to a complex of weak macroeconomic signals.
Several factors support this position. First, retail sales in the U.S. are showing a noticeable cooling, indicating a decline in consumer activity. Second, fresh labor market statistics disappointed market participants, failing to confirm the previous resilience of employment. Third, inflationary pressure continues to ease, reducing the need for additional restrictive measures from the regulator.
Notably, just a week ago, the futures market fully priced in a 25-basis-point rate hike in December. However, now, after the release of fresh data, investor expectations have shifted to January 2027. This suggests that the market is beginning to revise its forecasts toward a softer monetary policy trajectory, albeit with a noticeable delay.
From my point of view, the current dynamics of macroeconomic indicators indeed leave the Fed with no room for maneuver toward raising rates in the coming months. However, completely ruling out such a move would be a mistake: if inflation accelerates again amid geopolitical shocks or rising energy prices, the regulator may be forced to act more aggressively than the market expects. Investors should remain cautious and not rely on unambiguous scenarios.