Goldman Sachs and JPMorgan Both Turn Hawkish, Predicting Fed to Raise Rates by 25bps in September
nashnova research
Goldman Sachs and JPMorgan have abandoned their "hold" forecasts, now predicting the Fed will raise rates by 25 basis points in September — driven by hotter-than-expected inflation data and oil prices above $100 a barrel, their simultaneous pivot signals a hardening Wall Street consensus for tighter policy.
Why did both banks flip at the same time?
Goldman changed its call last Friday; JPMorgan followed. Both now forecast a 25 bp hike at the Sept 15–16 FOMC meeting.
Two triggers converged: August CPI and PPI both beat expectations, and Middle East tensions pushed oil past $100 per barrel.
This means → the earlier narrative — "inflation will cool on its own, no more hikes needed" — has been broken by data. Two major banks flipping together is not an isolated call; it is Wall Street collectively reassessing inflation risk.
How do Goldman's and JPMorgan's views differ?
Goldman economist David Mericle frames it as a credibility issue: markets have already priced in a hike, so standing pat would actually damage the Fed's credibility.
JPMorgan is more aggressive — forecasting 25 bp hikes in both September and December, and raising its terminal-rate estimate to 3.25%.
In plain terms = Goldman says "the arrow is on the string — they have to release it." JPMorgan says "it's not just one arrow; there's another coming."
How strong is the inflation data?
August CPI (Consumer Price Index — tracks what households pay for everyday goods) and PPI (Producer Price Index — tracks factory-gate prices) both came in above expectations.
At the same time, escalating Middle East tensions lifted oil to $100 a barrel, adding fresh uncertainty to the inflation outlook.
This means → price pressure is tightening from both the consumer and producer ends simultaneously. Oil-price gains will ripple through supply chains, making it hard to sustain the "inflation is fading" story in the near term.
What is the market pricing in?
The CME FedWatch tool shows an 87% probability of a 25 bp hike this month, up from roughly 70% before the latest inflation prints.
Markets also expect another hike in December, aligning with JPMorgan's "two consecutive hikes" forecast.
This reflects that the banks are not leading the market — they are confirming a consensus that was already forming. A September hike is now near-certain in market pricing.
After the hike — will rates ever come down?
In a separate note, Goldman added that it still expects the Fed to cut rates twice in 2027. The hiking path is delayed, but the direction has not changed.
Goldman's read: this hike is driven more by market pricing momentum than by a fundamental deterioration in inflation.
In plain terms = Goldman sees this as a "market-forced hike," not the start of an open-ended tightening cycle. Rates are not headed up forever — the timeline for cuts just got pushed back.
What should investors watch this week?
The Fed concludes its meeting on Wednesday. Whether it delivers the 25 bp hike will either validate or shatter market consensus.
More important than the hike itself is the post-meeting signal: any hint of another hike in December, and whether Chair Warsh can follow through on a hawkish stance under political pressure.
This means → a single hike has limited impact on its own. But if the Fed signals consecutive hikes, the repricing of bonds and risk assets is only just beginning.
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