Goldman Sachs Joins Wall Street Peers in Predicting September Fed Rate Hike

Goldman Sachs has revised its forecast and now expects the U.S. Federal Reserve to raise interest rates by 25 basis points at its September meeting. The shift places the brokerage alongside a growing number of Wall Street firms that anticipate further policy tightening as inflation concerns persist.

In a note issued on Friday, Goldman Sachs reversed its earlier expectation that the central bank would hold rates steady. The bank attributed the change primarily to market pricing, which indicates a high probability of a rate increase, and to policymakers' likely reluctance to surprise investors with a pause. The brokerage added that the adjustment was not driven by a significant shift in its economic outlook.

The revised forecast follows stronger-than-expected U.S. producer price data and a surge in oil prices above $100 a barrel, developments that have rekindled inflation worries. These factors have prompted investors and some brokerages to increase bets that the Fed may need to tighten policy further.

Goldman Sachs also noted that the recent jump in oil prices could make some policymakers more inclined to support additional tightening.

Markets are now pricing in an 87% chance of a quarter-point rate hike this month, up from roughly 70% before the latest data releases, according to CME's FedWatch Tool. Investors also expect another increase in December.