Goldman Sachs now expects Fed to raise rates by 25 bps in September

Goldman Sachs has updated its outlook to anticipate a 25 basis-point rate hike by the Federal Reserve in September, aligning with a growing consensus among Wall Street banks that persistently high inflation may warrant additional monetary tightening. The revision follows the bank’s earlier projection of no change in policy, but now reflects shifting market expectations and the Fed’s likely desire to avoid surprising investors. The shift is also influenced by recent oil price increases, which have climbed above $100 per barrel, potentially prompting further policy adjustments. Stronger-than-anticipated US producer price data further supports the view that inflation pressures remain elevated, prompting Goldman Sachs to revise its stance in line with broader market sentiment. According to the CME FedWatch Tool, markets now price an 87 percent probability of a 25-basis-point hike in September, with a further rate increase expected in December.