Goldman Sachs Moves Fed Rate Hike Forecast to December on Slowing Inflation

Goldman Sachs has delayed its forecast for the next Federal Reserve interest rate hike from October to December, following weaker-than-expected August inflation data, and warned the tightening cycle may already be over. The core PCE price index rose 0.25% month-over-month in August, slightly below forecasts, while its year-over-year increase slowed to 3.01%, significantly undershooting projections. This decline was partly attributed to downward revisions in historical data due to a methodology change in portfolio management calculations. Market pricing reflects about a 35% probability of a December rate hike, according to CME FedWatch data. Goldman's chief economist Jan Hatzius cited the inflation data and New York Fed President John Williams' comments as reasons for the shift, noting the Fed may conclude no further hikes are needed. The firm forecasts core PCE growth of 3.0% in Q4, below the Fed's median projection of 3.4%.