Goldman Pulls Forward the Waiting Game: Second Hike Now a December Maybe 🤔

Goldman Sachs has shifted its forecast for a second Federal Reserve rate hike to December, citing softer-than-expected August PCE inflation data and recent remarks from New York Fed President John Williams. In a research note, the bank said an October hike now appears unlikely and that the FOMC may ultimately decide that additional increases this year are unnecessary.

The revised outlook follows the August PCE inflation release, which came in below market expectations and eased fears of an imminent second hike. Goldman Sachs said it now projects 3% growth in PCE on a Q4-to-Q4 basis, well below the 3.4% median forecast of FOMC participants. The bank also pointed to Williams' comments signaling no urgency to raise rates as supporting its updated view.

The Federal Reserve raised rates for the first time since 2023 at the September FOMC meeting, citing rising inflation tied to Middle East uncertainty. Talks aimed at ending the U.S.-Iran conflict have so far not produced positive results, and broader geopolitical tensions remain unresolved. Despite those conditions, Goldman Sachs said it sees a strong chance the Fed will conclude that additional hikes are not required.

The bank's updated timeline places any potential second hike in December rather than October, though it stressed the move is conditional on incoming data and Fed guidance. Market participants will look to subsequent inflation prints and Fed communications for further confirmation of the shifting trajectory.