Goldman Sachs Joins Wall Street’s Hawkish Shift
TREE NEWS reports: Goldman Sachs has reversed its forecast and now expects the Federal Reserve to raise interest rates by 25 basis points at its two-day meeting concluding September 16, joining a broad Wall Street consensus that has crystallized since the release of August CPI data. Chief US economist David Mericle said in a September 11 research note that the shift was triggered by core CPI rising 0.3% month-over-month, above the 0.2% consensus, pushing market-implied odds of a September hike to roughly 90%. Current pricing sits near 85%.
The Credibility Calculus Behind the Call
Notably, Goldman’s change of heart is not rooted in a fundamental reassessment of inflation. Mericle acknowledged the report only nudged the bank’s August core PCE forecast to 0.26% and did not alter its underlying view. Instead, the bank cited Fed credibility: with markets pricing near-90% odds, policymakers would be reluctant to hold steady and risk destabilizing markets. Goldman still believes above-target inflation stems largely from one-off factors expected to fade, and that core PCE running near a 2.5% annualized pace over three months supports that view. It also argues the economy is not overheating and inflation expectations are not at risk of de-anchoring, while a limited hike would do little to offset supply-driven price pressures.
Wall Street Consensus Forms Around September
Goldman is not alone. JPMorgan abandoned its wait-and-see stance and now forecasts 25 basis point hikes in both September and December, with chief US economist Michael Feroli noting core PCE has exceeded 3% every month this year. Citi economists Andrew Hollenhorst and Veronica Clark expect a September hike, arguing higher core inflation plus renewed energy price gains are “just enough to forge consensus.” MUFG scrapped its “on hold through 2026” projection and now expects a 25 basis point move in September.
Divergence on the Path Ahead
- Goldman Sachs: Cautious beyond September; further hikes possible but not baseline. October is unlikely given proximity to midterms and委员 preference for gradualism; December tightening becomes less necessary as inflation improves.
- TD Securities: Most hawkish, expecting three hikes — September, October, and January 2027 — arguing August CPI shows insufficient progress.
- JPMorgan: Two hikes this year but not consecutive: September, a October pause, then December, with no extension into 2027.
- MUFG: September hike, October pause, and a 55%-60% chance of a December move; flags the hike could prove a “policy error” and lifted Treasury yield forecasts, targeting 4.25% on 2-year, 4.625% on 10-year, and 5% on 30-year by year-end.
- Citi: Most dovish, expecting a September hike followed by a hold until June 2027, then three cumulative cuts by end-2027 as inflation cools.
Market Implications
A near-certain September hike would lift short-end yields and the dollar while pressuring rate-sensitive equities, particularly growth and tech names. Long-duration bonds face risk if the Fed signals a slower easing path, though Goldman’s view that a single hike has limited economic impact may cap the damage. Gold could stay supported by policy uncertainty, while crypto — highly sensitive to liquidity conditions — may see near-term volatility as traders reprice the rate path. Commodities face a mixed picture: oil’s recent rise is itself part of the hawkish case, but tighter policy could weigh on industrial demand.
Key Takeaways for Investors
- The debate has shifted from “if” to “how many” — positioning for a September hike is now consensus, so the marginal risk lies in the post-September path.
- Watch the Fed’s forward guidance closely; a hawkish dot plot or statement would matter more than the hike itself.
- Duration risk is elevated: MUFG’s raised Treasury forecasts suggest bond investors should prepare for higher long-end yields.
- Rate-sensitive sectors and crypto may see amplified volatility around the decision.
- Note the unusual driver — credibility rather than economics — which raises the risk the hike proves a “policy error” if inflation continues to cool.
