Goldman Sachs has moved its forecast for the second rate hike by the Federal Reserve from October to December after the core PCE inflation data for August came in below expectations. According to the new data, the core PCE in August rose by 0.25% compared to July, reaching 3.01% year-over-year, which also fell short of forecasts. The bank expects the core PCE in the fourth quarter to be 3%, which is 0.4 percentage points below the Fed's median forecast of 3.4%. Goldman Sachs notes a strong likelihood that officials will decide that further rate hikes are not necessary. New York Fed President John Williams previously mentioned that he does not see an "urgency" for an immediate rate hike, despite considering one additional hike this year as his base case.
Williams' comments on expectations and caution were recorded in a report published on September 29. At the same time, another Fed member, Michael Barr, expressed support for further tightening of monetary policy, pointing to increased inflation risks and reduced risks to employment. He noted that he did not see a clear trend towards achieving the 2% inflation target based on data from previous months.
At the Fed meeting on September 16, rates were raised by 25 basis points to a range of 3.75% to 4%. This decision was unanimous, and surveys showed that 16 out of 18 participants expect at least one more hike of 25 basis points by the end of the year. Financial forecasts indicated that rates could reach between 4% and 4.25% by the end of 2026 and 2027. The next employment data in the U.S. will be released on October 2, ahead of the next Fed meeting. Based on the results of this data, Goldman Sachs continues to monitor risks and adjust its forecasts in light of the current market situation.
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