Goldman Sachs Says Market's Rate Hike Expectations for the Fed Are Too Hawkish

Goldman Sachs has stated that the market's expectations for a Federal Reserve interest rate hike are overly aggressive, as inflation in the United States is cooling down. Jan Hatzius, the chief economist at Goldman Sachs, pointed out in a report that weak retail sales data, disappointing employment figures, and a continued slowdown in inflation data make the likelihood of a rate hike at the Fed's September meeting "extremely low." Hatzius believes that over time, the chances of improvement in inflation data are greater than the chances of deterioration, indicating that the market's pricing of the federal funds rate is too hawkish. Data shows that the market has pushed back expectations for the next 25 basis point rate hike by the Fed to January next year, whereas just a week ago, the market fully expected the Fed to raise rates in December. Goldman Sachs believes that although market pricing is no longer as hawkish, there is still room for further easing of rate hike expectations.

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