Goldman Sachs: A September rate hike by the Fed is almost ruled out — the market is overestimating risks.
Goldman Sachs analysts have concluded that current market expectations regarding further tightening of the U.S. Federal Reserve's (Fed) monetary policy are excessively inflated. Against the backdrop of sustained inflation slowdown, which has dropped to 4% on an annual basis, the bank assesses the likelihood of a key rate hike at the September meeting as extremely low.
Goldman Sachs Chief Economist Jan Hatzius emphasized in his analytical review that a rate hike in September is "almost certainly not going to happen." This conclusion is based on a set of weak macroeconomic signals: disappointing retail sales data, sluggish employment dynamics, and a sustained decline in consumer prices. These factors, in my assessment, form a fundamental counterargument to the "hawkish" sentiment that dominated the market just a few weeks ago.
Notably, just a week ago, the futures market fully priced in a 25-basis-point rate hike in December of this year. However, there has now been a significant shift in expectations: investors are moving the potential Fed move to January 2027. This suggests that market participants are beginning to realize the depth of the economic cooling, albeit with noticeable delay.
From my point of view, such a correction in expectations is only the beginning. If inflation data continues to show a downward trend, and the labor market does not show a sudden recovery, the Fed may abandon further hikes altogether in this cycle. For the cryptocurrency market, this is a positive signal: stabilization of rates reduces pressure on risk assets and creates prerequisites for the return of liquidity to digital currencies.