Key facts
- Goldman Sachs believes a September Federal Reserve interest rate hike is very unlikely.
- Cooling inflation and softer economic data are cited as reasons for the unlikely hike.
- Goldman Sachs chief economist Jan Hatzius believes market pricing for rates is too hawkish.
- July's inflation data showed a mixed picture.
- Headline inflation was benign due to falling energy and food prices.
- Core services inflation showed renewed acceleration in July.
- Persistent price pressures in core services could support a hawkish Fed stance.
Goldman Sachs has indicated that a Federal Reserve interest rate hike in September is 'very unlikely.' The bank's chief economist, Jan Hatzius, cited cooling inflation and softer economic data as reasons for this assessment. Hatzius also believes that current market pricing for interest rates is overly hawkish, suggesting a disconnect between market expectations and the economic reality.
This outlook from Goldman Sachs contrasts with some interpretations of the latest inflation data. July's inflation figures presented a mixed scenario. The headline inflation rate was benign, largely influenced by decreases in energy and food prices. However, underlying core services inflation demonstrated renewed acceleration. This persistent upward pressure in core services suggests that the Federal Reserve may still find reasons to maintain a hawkish stance, despite the more favorable headline numbers. The divergence between headline and core inflation could complicate the Federal Reserve's decision-making process regarding future monetary policy adjustments.