Goldman Sachs has revised its Federal Reserve forecast and now expects a 25-basis-point rate increase when policymakers conclude their Sept. 15–16 meeting.
Summary
- Goldman Sachs now expects a 25-basis-point Federal Reserve rate increase at Wednesday’s policy decision meeting.
- August consumer prices rose 0.4%, while annual headline inflation stayed unchanged at 3.4% across America.
- Core CPI increased 0.3% monthly but eased to a five-year-low 2.4% annual rate in August.
- Interest-rate futures assigned an 87% probability to a September hike after the inflation release Friday.
- The FOMC will publish its decision, projections, and policy statement on September 16 in Washington.
CoinDesk reported on Sept. 13 that Goldman abandoned its previous forecast for no change after August consumer inflation data and interest-rate futures strengthened the case for a hike.
The Federal Open Market Committee will announce its decision at 2 p.m. Eastern Time on Sept. 16. A press conference is scheduled for 2:30 p.m., according to the Federal Reserve’s official calendar.
A quarter-point increase would lift the federal funds target range from 3.50%–3.75% to 3.75%–4.00%. The Fed has not committed to that decision, and futures pricing represents market expectations, not an official indication from policymakers.
Goldman Sachs changes its Fed rate hike forecast
Goldman’s economists said the August Consumer Price Index report produced only a small revision to their core Personal Consumption Expenditures inflation estimate. The bank raised its forecast for monthly core PCE to 0.26%, according to the research note cited by CoinDesk.
“[The report] has not changed our fundamental inflation view,” Goldman said. The bank argued, however, that holding rates unchanged could provoke a sharp response because markets had assigned close to a 90% probability to an increase.
Interest-rate futures put the probability at 87% after the CPI release, up from 72% one day earlier, the Wall Street Journal reported. The probability of at least one increase by year-end reached 97%.
Goldman’s revised forecast does not mean the firm knows how Fed officials will vote. It shows that the bank considers an increase the most likely outcome based on available economic data, policymaker communication and market pricing.
A Reuters poll completed before the CPI release found that most economists still expected the Fed to hold rates through 2026. Reuters noted that confidence in the no-change forecast had weakened as more analysts began anticipating at least one increase.
August inflation delivered mixed signals
The U.S. Consumer Price Index increased 0.4% in August after seasonal adjustment, the Bureau of Labor Statistics reported. Headline inflation remained at 3.4% over the preceding 12 months, unchanged from July.
Core CPI, which excludes food and energy, rose 0.3% during the month. Its annual rate eased to 2.4% from 2.5%, reaching its lowest level in five years.
Energy costs presented a different picture. The BLS said the energy index increased 16.3% over the year through August, while food prices gained 2.7%.
Communication services, lodging, airline fares, education, and used vehicles recorded monthly increases. Medical care and motor vehicle insurance were among the categories that declined.
KPMG chief economist Diane Swonk said service-sector details remained uncomfortable for the Fed despite the lower annual core rate. She estimated that services excluding housing components increased 0.5% during August and 3% from one year earlier.
“The gains were heavily in services,” Swonk said. Her description of the service data as evidence of persistent pressure represents an economic assessment, not a conclusion issued by the BLS or Federal Reserve.
Swonk estimated that August headline PCE inflation could rise 0.4% monthly, with core PCE increasing 0.3%. Her forecast would place the respective annual rates at 3.8% and 3.4%, but the Bureau of Economic Analysis has not released the August PCE report.
Economists dispute the case for higher rates
James Thorne, chief market strategist at Wellington-Altus, questioned whether the economic data justified the change in Wall Street forecasts. He argued that Goldman’s revision appeared tied more closely to market expectations than to a changed inflation outlook.
“No material change in inflation outlook, but a hike to calm Wall Street,” Thorne said. His statement represents his interpretation of Goldman’s reasoning and does not establish the Fed’s motive.
Thorne pointed to annual wage growth of 3.1% and said he saw no verified wage-price spiral. He argued that higher borrowing costs cannot expand oil production or repair supply disruptions, while rate increases can reduce demand, investment and household purchasing power.
Swonk reached a different conclusion. She expects three rate increases by early 2027 and said the August report raised the possibility of a unanimous September vote.
“We now expect three rate hikes by early 2027,” she said. The projection belongs to KPMG and has not been endorsed by the FOMC.
The Fed targets 2% inflation using the PCE price index, not CPI. Although annual core CPI fell to 2.4%, Swonk’s forecast places core PCE at a higher 3.4%, showing why analysts have reached different conclusions from the same CPI release.
Bitcoin reacts as Fed expectations rise
Bitcoin traded around $77,000 on Sept. 13 after moving between an intraday low near $76,500 and a high above $77,400. Its price remained below $80,000 as traders prepared for the Fed announcement.
Following the CPI release, Bitcoin briefly recovered above $78,000 as rate-hike odds reached 81%, as crypto.news reported. The probability cited in that article came from Polymarket and was lower than the 87% futures estimate reported by the Wall Street Journal.
Before the inflation figures, Bitcoin had remained near $79,500 as three U.S. economic catalysts approached. The scheduled events included producer inflation, consumer inflation and the September FOMC meeting.
Earlier in September, Bitcoin faced rising rate-hike expectations despite continued ETF demand. Spot Bitcoin ETF inflows can support demand, though they do not remove the market’s exposure to interest rates, Treasury yields or changes in the U.S. dollar.
Crypto prices frequently respond to Fed decisions because higher interest rates can increase yields on lower-risk assets. Individual market moves may have several causes, making it difficult to attribute Bitcoin’s daily price changes exclusively to monetary policy expectations.
Fed will release rates and projections on Sept. 16
The FOMC’s two-day meeting begins Sept. 15. Policymakers will release a policy statement, updated economic projections and their individual expectations for future interest rates when the meeting ends the following day.
Fed Chair Kevin Warsh will address reporters 30 minutes after the statement. Questions are likely to cover energy-driven inflation, service prices, labor-market conditions and whether a September increase would begin a longer tightening cycle.
The Summary of Economic Projections will provide officials’ estimates for inflation, unemployment, economic growth and the federal funds rate. Its rate projections are not binding commitments and may change when new data becomes available.
Markets will compare the policy statement with the Fed’s previous language for any change in its assessment of inflation and employment. Investors will watch whether Warsh describes a rate increase as a one-time adjustment or leaves further decisions dependent on incoming data.
A unanimous vote is not guaranteed. The statement will identify any dissenting officials and specify whether they preferred no change, a larger increase or another policy option. The FOMC will publish its interest-rate decision and economic projections at 2 p.m. Eastern Time on Sept. 16, followed by Warsh’s press conference at 2:30 p.m.