Markets now assign an 87% probability to a Federal Reserve rate hike on Sept. 16, even as President Donald Trump renews his push for lower rates. Goldman Sachs has dropped its no-change forecast and now expects a quarter-point increase after August inflation data came in mixed.
Trump told reporters in Ireland that U.S. interest rates should be the lowest in the world, repeating months of pressure on the central bank even as traders brace for the opposite outcome this week. Asked whether he expects the Fed to raise rates Wednesday, Trump said he did not know.
Trump renews his rate-cut demand
Trump has escalated his criticism of Fed policy before. On Sept. 3, he wrote on Truth Social: "Lower the rate or I'll stop trading with countries with which we have a deficit." That warning came weeks before Wednesday's decision, which would be the first interest rate hike under Fed Chair Kevin Warsh, whom Trump picked to succeed Jerome Powell.
He had spent months harshly criticizing Powell over Fed policy, and the Justice Department had briefly probed Powell over Federal Reserve building renovations.
Goldman abandons its no-change call
Goldman Sachs changed its forecast to a 25-basis-point hike after Friday's consumer price index report, CoinDesk reported. The August CPI rose 0.4% on the month, with annual headline inflation holding at 3.4%. Core CPI increased 0.3% but eased to a five-year-low 2.4% annual rate.
A quarter-point move would lift the federal funds target range from 3.50%-3.75% to 3.75%-4.00%. Interest-rate futures put the odds of a September hike at 87%, up from 72% a day earlier, and assigned a 97% probability to at least one increase by year-end, the Wall Street Journal reported.
Oil and Treasury yields add pressure
Crude oil prices have jumped 20% over the past two weeks as Mideast supply routes come under further strain, a move that points to further headline inflation gains in September. Amid the surging oil prices and broader inflation pressures, the 10-year Treasury yield surged 19 basis points to 4.97%, its highest level since nearly touching 5% in October 2023.
Not every economist agrees a hike is justified. James Thorne, chief market strategist at Wellington-Altus, argued that Goldman's revision looked tied more to market expectations than to a changed inflation outlook, pointing to annual wage growth of 3.1% that he said shows no verified wage-price spiral.
Sources: Investor's Business Daily, crypto.news
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