Goldman Sachs: Fed Rate Hike in September Now Highly Unlikely, but Market Rate Pricing Remains Hawkish
Nashnova编辑部
Goldman chief economist Jan Hatzius says a September Fed rate hike has become extremely unlikely — consumption, jobs, and inflation are all softening at once. Yet markets still price the rate path too hawkishly, meaning room remains for a dovish repricing.
Why does Goldman call a September hike "nearly impossible"?
The call rests not on one data point but on three trend lines turning simultaneously: cooling consumption, stalling employment, and improving inflation.
This means → unless the August data released in early September show a "dramatic reversal," the conditions for a hike simply aren't there.
In plain terms = all three indicators that would justify tightening have rolled over — the Fed can't move in that environment.
How soft are consumption and employment, exactly?
July retail sales dipped partly for a technical reason — Amazon Prime Day was pulled forward, borrowing demand from later weeks. But the deeper issue: this spring's strong spending was driven by a one-off surge in tax refunds, not genuinely stronger household finances.
Real cash flow has stalled. Goldman forecasts second-half consumption growth slowing to 1%–1.5%, with overall GDP likely running slightly below potential.
On the jobs side, unemployment fell from 4.5% last December to 4.1% in July — looks good on the surface. This reflects a drop in labor-force participation, not more people finding work.
Estimated underlying trend job growth has fallen to roughly 5,000 per month, far below the ~50,000 needed to hold unemployment steady. In plain terms = the labor market is running in place, and wage growth keeps fading.
July inflation looked hotter — did the trend actually worsen?
Core PCE — the personal-consumption-expenditures price index, the Fed's preferred inflation gauge — is expected at 0.20% month-on-month for July, up from 0.13% in June.
Goldman notes that more than half of the increase comes from a single sub-component, "portfolio management services," whose measurement method is itself contested and is expected to be revised sharply lower at the end of September.
This means → the July inflation reading is inflated by a statistical quirk. The broader path toward core PCE near 2% by 2027 has not been disrupted.
How strong is the hawkish camp inside the Fed?
The June dot plot — FOMC members' individual rate forecasts — showed 9 of 18 participants expecting a 2026 hike. But among the 12 with a vote, only roughly 4–5 actually lean hawkish.
The July meeting produced 3 explicit dissenting votes, widening the hawkish flank somewhat.
Yet employment and inflation data over the past two months have clearly softened. This reflects an environment where dovish members are extremely unlikely to flip toward supporting a hike — the bar for September has been raised very high.
If no hike, what does it mean for asset prices?
Bonds: improving inflation + falling hike premium + fiscal concerns → the U.S. Treasury yield curve steepens further (long-end rates rise relative to the short end).
Equities: strong Q2 earnings and stabilizing AI trades → major indexes have hit new highs; the upward path into year-end still holds.
FX: globally moderate inflation favors high-yield currencies; USD stays firm vs. CAD, EUR stays firm vs. CHF.
In Europe, Goldman maintains a base case of a 25 bp ECB hike in September, but notes the next move after that is more likely a rate cut, timed around mid-2027.
What is the single most important thing to watch next?
Goldman flags that the market's pricing of the fed-funds rate path still leans hawkish, with room to shift further toward lower rates.
This means → if August data released in early September continue to run soft, market rate expectations will reprice lower — benefiting both bonds and equities.
In plain terms = the market is still betting the Fed will be tougher than Goldman thinks the data warrant — the repricing process itself is the trade opportunity.
Content is for reference only, not financial advice.