Finance · updated 4h ago · 2 min read
Goldman Sachs Predicts Another US Federal Reserve Rate Hike in October After Warsh Signals Tightening
Goldman now expects a 25bp Fed rate hike in October after hawkish signals. Goldman reversed its earlier view of a pause after September's hike.
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8 of 9 outlets skipped it: chair Warsh said the hike removed only a dose of accommodation..
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Fed hike outlook shifts
Goldman Sachs expects the US Federal Reserve to raise interest rates again in October after policymakers signaled they may need to tighten further to bring inflation back to target, following the central bank's first rate hike in three years.
“Goldman Sachs expects the US Federal Reserve to raise interest rates again in October”
Reuters said the brokerage forecast a 25-basis-point increase at the Fed's October meeting after the central bank on Wednesday raised rates by a quarter point to a 3.75%-4.00% range.
CoinDesk reported Goldman Sachsnow expectsthe Federal Reserve to raise its benchmark interest rate again in October, describing it as a 180-degree pivot from its earlier call for a September hike followed by a pause.
CoinDesk also tied the shift to Fed Chair Kevin Warsh's hawkish tone, saying inflation remains “too high” and that the latest hike removed a “dose of accommodation,” implying policy is still not restrictive enough.
Warsh tone rattles markets
Reuters said the Fed's projections pointed to further tightening, with a 16-2 majority of officials expecting at least one more hike this year and four policymakers forecasting two additional increases.
TradingKey said the Fed unanimously voted 12-0 on Wednesday to raise the target range for the federal funds rate to 3.75% to 4.00% and that Chair Kevin Warsh described the rate hike as "removing a dose of accommodation" during the press conference.
TradingKey reported that Warsh's remarks and the dot plot signaling prolonged high interest rates surprised markets, pushing Treasury yields up and equities down.
Reuters added that traders were pricing roughly a 53% chance of an October rate increase and an 81% probability of a hike in December, according to CME FedWatch data.
Global policy watch and risks
Reuters said markets will also be watching policy decisions from the Bank of England, due later in the day, and the Bank of Japan on Friday for further clues on the global interest-rate outlook.
“Markets will also be watching policy decisions from the Bank of England”
Reuters reported oil prices have climbed above $100 a barrel, adding to concerns that inflation pressures could remain persistent, while recent economic data have pointed to continued resilience in growth.
WTVB | Other said the US dollar hit a seven-week high against its major peers, underpinned by a jump in short-term Treasury yields as markets ramped up wagers that the Fed may have to lift rates again.
WTVB | Other quoted Tai Hui, APAC chief market strategist at JPMorgan Asset Management, saying investors would need to reassess the valuations for assets especially tech stocks if the Fed remained hawkish going into 2027.