Goldman Sachs: Market Expectations for Fed Rate Hikes Are Too Hawkish

Odaily Planet Daily News Goldman Sachs stated that given the cooling U.S. inflation, market expectations for Federal Reserve rate hikes remain overly aggressive. Goldman Sachs Chief Economist Jan Hatzius wrote in a report that due to weak retail sales data, disappointing employment figures, and continued slowdown in inflation data, the likelihood of a Fed rate hike at the September meeting is "extremely low." Hatzius wrote: "Based on our baseline economic forecast, the probability of further improvement in inflation data over time is higher than the probability of deterioration again. We still believe that the market's pricing of the federal funds rate is too hawkish."

Data shows that the market has postponed expectations for the next 25 basis point Fed rate hike to January next year, while 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 rate hike expectations to further fade. (Jin Shi)