2 days ago
Goldman Sachs expects September Fed hike amid Trump rate pressure
Goldman Sachs now thinks the Federal Reserve may raise interest rates by 25 basis points in September.
Earlier, the bank expected no change.
Investors have recently become more likely to expect a rate increase.
This change happened after new data showed prices rose faster in August.
Higher tariffs and energy costs are adding to inflation.
The Fed must balance controlling rising prices with supporting economic growth.
President Donald Trump wants much lower interest rates to make borrowing cheaper.
The decision is politically sensitive because it comes before the US midterm elections.
The Fed is expected to announce its decision on Wednesday after a two-day meeting.
Goldman Sachs now forecasts a 25-basis-point Federal Reserve rate increase at the September policy meeting.
The bank reversed its earlier prediction that the Fed would leave rates unchanged, citing stronger market expectations for a hike.
The federal funds rate is currently targeted at 3.5% to 3.75%.
August consumer prices rose at their fastest pace in four months, with tariffs and energy costs adding to inflation pressures.
Donald Trump is urging the United States to have the world's lowest interest rates, while officials say the Fed's independence will be defended.
- Who
- Goldman Sachs, the Federal Reserve, President Donald Trump, and US economic officials.
- What
- Goldman Sachs expects the Federal Reserve to raise its benchmark interest rate by 25 basis points.
- Where
- The United States.
- When
- At the Fed's September policy meeting, with the decision due Wednesday after a two-day meeting.
- Why
- Market pricing and persistent inflation have strengthened expectations of a hike, while Trump is pressing for lower borrowing costs.
Lower-rate advocates
Rate-hike expectations
Direction of interest rates
Lower-rate advocates
Donald Trump argues that the United States should have the world's lowest interest rates and has repeatedly criticized high borrowing costs.
Rate-hike expectations
Goldman Sachs now expects the Federal Reserve to raise rates by 25 basis points as market pricing increasingly points to a hike.
Inflation versus growth
Lower-rate advocates
Lower rates could support economic growth and reduce household borrowing costs and affordability pressures.
Rate-hike expectations
The Federal Reserve faces persistent inflation, including faster August price growth and added pressure from tariffs and energy costs.
Political influence and independence
Lower-rate advocates
Trump has publicly pressed the Fed to lower rates and has threatened to stop trading with countries where the United States runs trade deficits unless rates fall.
Rate-hike expectations
National Economic Council Director Kevin Hassett said Trump would defend Fed Chair Kevin Warsh's independence regardless of the decision.
Key facts
- Expected move
- A 25-basis-point increase in the benchmark interest rate.
- Goldman's previous forecast
- The Federal Reserve would leave rates unchanged.
- Current target range
- 3.5% to 3.75% for the federal funds rate.
- Inflation signal
- Consumer prices rose at their fastest pace in four months in August.
- Inflation pressures
- Higher import tariffs and energy costs are contributing to price pressures.
- Political pressure
- Donald Trump says the United States should have the world's lowest interest rates.
- Timing
- The decision comes weeks before the US midterm elections.
Quotes
Kevin Hassett
US National Economic Council director interviewed by Fox News
“If the Fed raises rates, I’m sure he’s not going to be super happy about it”
firstpost.com
“We should be paying the lowest interest rate in the world”
firstpost.com
Sources
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