Goldman Sachs has reversed its call on the US Federal Reserve and now expects the central bank to raise interest rates by 25 basis points in its September meeting, Reuters reported, quoting the brokerage in a note on Friday.
The investment bank had previously expected the Fed to keep rates unchanged. Its latest forecast comes as markets price in a high probability of a rate hike and policymakers are seen as unlikely to surprise investors with a pause.
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Goldman Sachs Reverses Fed Call
Goldman Sachs said the shift in its forecast was driven primarily by market pricing rather than a significant change in its economic outlook, Reuters reported.
The brokerage also said the recent surge in oil prices could make some policymakers more inclined to support additional tightening.
The revised call follows stronger-than-expected US producer price data and a surge in oil prices above $100 a barrel, which have renewed concerns about inflation.
Markets Raise Rate Hike Bets
According to the CME's FedWatch Tool, markets are now pricing in an 87% chance of a quarter-point Fed rate hike this month, which stood at 70% before the latest economic data releases. Markets are also pricing in another rate increase in December.
As Goldman Sachs revised its forecast, it joined a growing number of Wall Street firms expecting further policy tightening as inflation concerns persist.
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