Economists at Goldman Sachs have revised their monetary policy forecast, now projecting the U.S. Federal Reserve will raise its benchmark interest rate by 25 basis points at its September meeting. The firm attributed the change to economic data indicating that inflation remains above the central bank’s target.
In a note issued to clients, the investment bank stated that recent economic indicators, including inflation reports and labor market figures, prompted the adjustment. Previously, Goldman Sachs had forecasted that the Federal Reserve would pause its series of rate hikes. A basis point is one-hundredth of a percentage point.
The forecast revision aligns Goldman Sachs with the projections of several other major financial institutions. Analysts at firms including Bank of America have also stated they expect the Federal Open Market Committee (FOMC), the Fed’s policy-setting body, to approve another quarter-point rate increase.
These projections are based on the Federal Reserve’s ongoing efforts to bring inflation down to its 2% annual target. Federal Reserve Chair Jerome Powell has repeatedly emphasized that the committee’s decisions will be “data-dependent,” meaning future rate moves will be guided by the latest economic reports on inflation, employment, and consumer spending.
The FOMC has raised the federal funds rate multiple times since March 2022. The stated goal of these increases is to slow economic activity and curb price pressures.
However, a consensus has not been reached among all market analysts. Some economists at other firms maintain that the Federal Reserve will hold rates steady in September, arguing that the full effects of previous rate hikes have yet to be felt throughout the economy.
The Federal Reserve’s next scheduled policy meeting is set for September. The official decision on interest rates, along with the FOMC’s updated economic projections, will be released following the conclusion of the two-day meeting.
