Goldman Sachs expects the Federal Reserve to deliver a 25 basis-point increase in policy rates at the Federal Open Market Committee meeting on September 16, and the firm does not anticipate the FOMC will signal additional hikes beyond that move.
The investment bank added the September increase to its outlook after the release of the August consumer price index. Goldman said the August inflation report had only a limited impact on its broader inflation forecasts, but with market odds of a hike reaching roughly 90%, the FOMC is likely to proceed in order to avoid a negative market reaction to pausing.
Goldman anticipates several forms of muted communication from the Fed following the hike. The bank expects the policy statement to omit explicit guidance on the subsequent path of rates or the criteria that would trigger further increases. At the post-meeting press conference, Chair Warsh is likely to say the committee will "carefully assess" incoming data and may wait for multiple inflation prints before determining next steps.
On the dot plot, Goldman projects a 10-8 majority will reflect support for one additional hike, although it notes there is a chance a majority could back two hikes if some participants view the September move as a routine response to elevated oil prices rather than the start of a new tightening cycle.
Goldman raised its terminal federal funds rate forecast to a range of 3.25% to 3.5%, up from a prior forecast of 3% to 3.25%. The firm continues to expect two rate cuts in 2027, but has shifted those cuts to September and December instead of June and December.
On consumer activity, Goldman projects a 0.6% rise in core retail sales in August, above the 0.4% consensus. It attributes 0.4 percentage points of the projected strength to a rebound in the nonstore retailers category, which had been weak in July because an online shopping holiday occurred in June this year.
Goldman also reported readings on inflation components for August. Core CPI prices are estimated to have risen 0.29% for the month and 2.45% on a 12-month basis. Within that core figure, wireless phone service prices are said to have added 10 basis points, while airfares contributed 4 basis points, the latter impact linked to higher oil prices.
Adjusting for methodological changes set to be implemented, Goldman estimates core personal consumption expenditures prices rose 0.26% in August and were up 3.16% year-over-year.
Context and implications
Goldman’s updated outlook centers on a near-term tightening action paired with deliberately cautious language from the Fed, a combination that the firm views as intended to balance responding to recent price developments while avoiding a stronger signal of further hikes. The bank’s revised terminal rate and shifted timing for 2027 cuts reflect its recalibration following the August CPI release.