Goldman Sachs Shifts to Fed Hike Call, Sees Rates Rising to 3.75-4.00% This Week

Goldman Sachs joined JPMorgan in flipping to a base case of a 25 basis-point Federal Reserve rate hike at the September meeting, citing hotter-than-expected August inflation and a renewed surge in oil prices. Goldman's FOMC preview envisions the committee hiking to a target range of 3.75-4.00%, with rate cuts now pushed back to September and December 2027 and a higher terminal rate of 3.25-3.50%. Markets were pricing roughly an 87% probability of a hike, with Kalshi putting the odds at 80%, making the move widely seen as a near-certainty heading into the decision.

Goldman's rationale, per a ZeroHedge account, was partly that Fed Chair Warsh did not want to disappoint market expectations rather than a pure inflation-driven necessity, a view that drew sharp criticism from strategist Albert Edwards, who called a hike "criminally stupid." HSBC also pivoted to expecting 25 basis-point hikes in both September and December. The debate, as multiple sources noted, has shifted from whether the Fed will hike to how far and how long a renewed tightening cycle extends.

On rates beyond the US, Goldman raised its UK Gilt yield forecast as elevated energy prices reduced the probability of near-term Bank of England cuts, and separately predicted a BoE rate hike in November amid persistent inflation concerns. Goldman shares fell 4.1% to a session low on Monday as bank stocks broadly sold off, with JPMorgan dropping 2% and Citigroup falling 2.6%.

Away from monetary policy, Goldman was active across capital markets and research. Corning entered a $2 billion equity distribution agreement with the bank, sending Corning shares down roughly 9% on dilution concerns despite a strong year-to-date run. Goldman upgraded Swiss dental-implant maker Straumann to buy, reiterated buy ratings on Meta Platforms and two biotech names, and raised its humanoid-robot deployment forecast fivefold to 6.5 million units by 2035. The firm also hosted its Global Consumer and Retail Conference, featuring presentations from DICK's Sporting Goods, Canada Goose, Aramark, Genesco, Travel and Leisure, Trex, Petco, PVH, Chewy, and others, alongside its Communacopia and Technology Conference where Goldman investment banking co-head Dan Dees discussed AI's broad economic impact.