Goldman Sachs: Market Bets on Fed Rate Hike Too Aggressive, September Rate Hike 'Extremely Unlikely'
Goldman Sachs Chief Economist Jan Hatzius stated in a client report that market bets on a Federal Reserve rate hike remain overly aggressive.
Due to cooling inflation, a rate hike in September has become 'extremely unlikely.' Weak retail sales data, disappointing employment figures, and slowing inflation readings collectively diminish the necessity for a rate hike.
Goldman Sachs believes that based on baseline economic forecasts, inflation news is more likely to improve further rather than worsen again this year. Market pricing for the federal funds rate remains hawkish.
Traders have pushed back expectations for the next rate hike to January next year, having fully priced in a December action just a week prior. Goldman noted that while the shift in pricing has begun, there is still room for further pullback.
After two months of noticeably weakening employment and inflation data, it is difficult to see dovish officials turning to support a rate hike.
Mechanically, event-driven adjustments in U.S. Treasuries and interest rate futures occur: weak data and Goldman’s viewpoint reinforce a wait-and-see sentiment, directing funds towards interest rate-sensitive assets; cooling rate hike expectations pressure short-end yields, benefiting risk assets relatively.
Supplementary information shows that Goldman maintains a baseline scenario of no rate hikes this year.
Source: Public Information
ABAB AI Insight
Goldman Sachs has long predicted the Fed's path from a relatively dovish stance, having previously lowered rate hike probabilities or postponed tightening expectations during periods of weakening data. This time, it emphasizes that cooling inflation takes precedence over the market's hawkish pricing.
In terms of capital flow, the bank guides clients to reassess the interest rate path through client reports, shifting resources from rate hike bets to holding duration or risk assets, motivated by the desire to protect clients from losses due to mispricing while strengthening its macro research influence.
Similar cases can be seen in 2023-2024, where Goldman repeatedly led the market in lowering rate hike expectations during inflation declines, contrasting with institutions like JPMorgan that diverged from the market during data discrepancies; currently, we are in a phase of data-driven policy reassessment.
Structural judgments indicate a transfer of pricing power: market pricing is gradually aligning with economic fundamentals, as the accumulation of soft data weakens the hawkish narrative, forcing the futures market to correct overly aggressive rate hike probabilities.
ABAB News · Cognitive Law
- Data cooling leads to early pullback in expectations.
- The more hawkish the market, the greater the correction space.
- Cooling inflation is the real brake on rate hikes.