Goldman Sachs Says September Rate Pricing Is Still Hawkish as U.S. Stocks Face Repeated Rate-Expectation Swings

Goldman Sachs chief economist Jan Hatzius said on Aug. 20 that markets are still pricing the September FOMC meeting in a hawkish way, even though the firm sees the odds of a rate hike at the Sept. 15-16 meeting as very low unless early-September August data reverse sharply. Goldman’s case rests on three points: job growth has slowed materially, consumer momentum has cooled, and the inflation trend is more likely to keep improving. From the firm’s perspective, recent data are weakening the argument for another hike. The bank said implied U.S. job growth in July was only about 5,000, below the level needed to keep the labor market in balance. Retail sales also softened, which Goldman says could slow consumption growth in the second half to 1% to 1.5%. On inflation, Goldman still expects core PCE to drift lower and to approach the Fed’s 2% target in 2027. Hatzius said the bar is high for dovish FOMC members to shift toward supporting a hike after two straight months of softer employment and inflation readings. Still, the July FOMC minutes, released at 4 a.m. Beijing time on Aug. 20, added a new source of market noise. The minutes showed more officials backing further policy tightening than in June, and several said higher rates could still be needed if inflation fails to cool further. That makes it hard for markets to fully embrace Goldman’s easier reading of the data. Short-term rates and tech valuations are likely to keep reacting to swings in policy expectations.