Goldman, JPMorgan Expect September Fed Rate Hike
Goldman Sachs and JPMorgan now predict a September Fed rate hike as inflation persists, shifting Wall Street's consensus on monetary policy.
Goldman Sachs and JPMorgan Chase now expect the Federal Reserve to raise interest rates in September, according to Reuters, marking a sharp shift in Wall Street’s outlook as inflation shows little sign of cooling. The two banking giants join a growing list of major institutions betting the central bank will resume its fight against rising prices after pausing earlier this year.
The revised forecasts arrive as traders in prediction markets recalibrate their own positions on Fed policy. Rate-hike odds have jumped in recent sessions, reflecting the same data that prompted Goldman and JPMorgan analysts to abandon their earlier calls for steady rates through year-end.
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Why Goldman and JPMorgan Changed Their Calls
Both banks cite persistent inflation as the driver. While the Fed had signaled it might hold rates steady after a series of aggressive hikes in prior quarters, recent economic data has complicated that picture. Consumer prices remain elevated, and core inflation—which strips out volatile food and energy costs—has refused to retreat to the Fed’s 2% target.
Goldman Sachs and JPMorgan had previously forecast no additional rate increases in 2025. The September pivot suggests their economists now see inflation risk outweighing recession risk, a calculation that hinges on labor-market strength and continued consumer spending.
What the Market Is Pricing
Prediction markets tied to Fed policy have moved in tandem with Wall Street’s revised outlook. Contracts that pay out if the Fed raises rates at its September meeting have climbed in recent days, though exact odds vary by platform and contract structure.
For traders new to Fed-rate markets, these contracts typically resolve based on the Federal Open Market Committee’s official announcement. A “yes” outcome pays if the Fed lifts its benchmark rate by at least 25 basis points (0.25 percentage points); a “no” outcome pays if rates hold or fall. The Fed’s September meeting is scheduled for mid-month, and markets will watch closely for Chair Jerome Powell’s commentary in the weeks leading up to it.
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What Happens Next
The Fed’s decision will depend on inflation prints released between now and September, particularly the Consumer Price Index and the Personal Consumption Expenditures index—the Fed’s preferred inflation gauge. A cooler-than-expected reading could pull Goldman and JPMorgan back toward a no-hike call; hotter numbers would cement September as the month policy tightens again.
Traders are also parsing employment data. If job growth slows sharply or unemployment spikes, the Fed may choose to hold rates even if inflation remains sticky. The dual mandate—maximum employment and stable prices—forces the central bank to balance competing risks, and that balance can shift quickly.
For now, Wall Street’s consensus is moving toward higher rates. Whether prediction markets, which aggregate the views of thousands of individual traders, will prove more accurate than the banks’ economists is a question that will resolve in a matter of weeks.
FAQ
Why are Goldman Sachs and JPMorgan now expecting a September Fed rate hike?
Both banks cite persistent inflation that has refused to fall to the Federal Reserve’s 2% target. Recent economic data showing elevated consumer prices and strong labor markets led analysts to revise their earlier forecasts of steady rates through year-end.
What do prediction markets say about a September rate hike?
Prediction-market contracts tied to Fed policy have moved higher in recent days, with odds rising that the Fed will raise rates at its September meeting. These contracts resolve based on the Federal Open Market Committee’s official announcement.
What data will determine whether the Fed actually raises rates in September?
The Fed will watch inflation reports—especially the Consumer Price Index and Personal Consumption Expenditures index—released before the September meeting. Employment data also matters: if job growth slows sharply or unemployment spikes, the Fed may hold rates even if inflation remains high.