Goldman Sachs Says Fed Rate Hike in September Unlikely

The Goldman Sachs Group Inc. asserts that market expectations for Federal Reserve interest rate hikes remain too aggressive despite cooling inflation in the United States. Chief economist Jan Hatzius stated in a client note that a rate increase in September is "very unlikely" following disappointing employment numbers, softer retail sales, and slowing inflation.

While traders have shifted expectations for the next quarter-point hike from December to January, Goldman Sachs believes there is still room for market pricing to unwind. CME FedWatch data shows traders currently price in a 30.6% chance of a 25 basis point rate hike to the 3.75%–4% range, with most expecting the Federal Reserve to maintain the status quo.

Analysts suggest this outlook could provide a tailwind for risk-on assets, including bitcoin. The bank predicts the US Treasury curve will steepen as inflation improves and hike premiums reduce, although heavy government borrowing and fiscal concerns continue to pressure long-dated yields.