Goldman Sachs pivots, forecasts Fed hike in October
Goldman Sachs now expects the Federal Reserve to raise rates again in October, pivoting after Wednesday’s 25 basis point hike to a 3.75%-4.00% target range. Policymakers’ projections point to at least one more increase this year, and traders are pricing just over a 50% chance of another 25 basis point move.
Goldman Sachs now expects the Federal Reserve to deliver another interest rate increase in October, shifting from its earlier view of a September hike followed by a pause. The call follows the Fed’s 25 basis point move on Wednesday that took the policy rate to a 3.75%-4.00% target range.
Updated projections from policymakers indicated a strong majority still anticipates at least one additional increase this year. At the post-meeting press conference, Federal Reserve Chair Kevin Warsh described inflation as “too high” and said the latest step merely removed a “dose of accommodation,” underscoring that policy may not yet be restrictive enough.
Why did Goldman shift its forecast to October?
The bank’s pivot reflects the Fed’s 25 basis point hike to a 3.75%-4.00% range and guidance that a strong majority of officials favor at least one more increase this year. That updated stance makes an additional move in October a live option, replacing an earlier expectation for a September hike and then a pause.
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Chair Kevin Warsh’s hawkish tone added weight to the outlook. By characterizing inflation as “too high” and the latest action as only removing a “dose of accommodation,” he signaled that financial conditions may need to tighten further. Traders are now pricing just over a 50% chance of another 25 basis point hike, aligning market odds with the revised forecast for an October move.
Item
Detail
Figure
Policy rate after Wednesday
Target range
3.75%-4.00%
Latest move
Increase size
25 basis points
Policymaker outlook
Further hikes in 2026
At least one
Market odds
Next 25 bps hike
Just over 50%
Forecast pivot
From September to October
October hike
What does the Fed’s guidance imply for the path of rates?
Guidance implies the tightening cycle is not finished. A strong majority of officials project at least one more increase this year, and Kevin Warsh’s remarks that inflation is “too high” suggest policy remains short of the restrictive stance officials seek, keeping the door open to another 25 basis point move.
The characterization that Wednesday’s hike removed only a “dose of accommodation” signals incremental steps may continue. With traders pricing just over a 50% probability of another increase, market expectations have converged with the policy bias articulated through projections and the press conference, reinforcing the plausibility of an October decision.
What should markets watch next?
Markets should watch whether incoming inflation readings corroborate the view that price pressures remain “too high” and whether policymakers continue to signal at least one additional hike. The balance of risks now tilts toward another 25 basis point increase in October, given the 3.75%-4.00% range and guidance pointing to at least one more move.
Traders’ odds—just over 50% for another 25 basis point step—provide a real-time gauge of conviction. Any shift in that probability, alongside further remarks from Chair Kevin Warsh, will frame the runway into October and clarify whether the tightening campaign extends beyond the latest adjustment.
As the October meeting approaches, the policy narrative centers on whether the Fed judges conditions sufficiently restrictive after the recent 25 basis point increase or opts to follow through on projections calling for at least one more hike.
This article is for informational purposes only and does not constitute financial, investment, or trading advice. Cryptocurrency markets are highly volatile and carry significant risk. Always conduct your own research (DYOR) and consult a qualified financial advisor before making investment decisions. Past performance does not guarantee future results.
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