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Softer Inflation Cools October Rate Hike Hopes
1 Oct
Summary
- Goldman Sachs now forecasts a December interest rate hike.
- US inflation rose less than expected in August.
- Rate futures show reduced probability of October hike.
Goldman Sachs has updated its projection for the next U.S. interest rate increase, now expecting it in December instead of October. This revision stems from a recent, softer-than-anticipated inflation reading for August.
The brokerage firm indicated that the Federal Reserve may ultimately decide that additional rate hikes are not required. This sentiment contrasts with the Fed's September rate increase, which was the first in three years and aimed at curbing inflation.
Data released on Wednesday revealed that US inflation, measured by the personal consumption expenditures price index, rose 3.4% annually in August, falling short of the 3.7% forecast by Reuters-polled economists.
Federal Reserve Bank of New York President John Williams stated that the central bank has ample time to review economic data before making decisions on future rate hikes.
Consequently, market participants have lowered their expectations for an October rate hike. CME Group's FedWatch Tool indicates a roughly 38% probability of a 0.25% increase in October, down from previous sessions. All eyes are now on the crucial September nonfarm payrolls report, due this Friday.
