Goldman Sachs forecasts additional Fed rate hike in March after hotter US inflation data

Goldman Sachs has forecast an additional 25-basis-point interest rate increase by the US Federal Reserve in March, revising its earlier outlook that the central bank would conclude its rate-hiking cycle in December following stronger-than-expected inflation data for October, Reuters reported.

According to Reuters, the investment bank is the first among its peers to revise its forecast after October's inflation figures marked the third consecutive month of upside surprises. The data has strengthened market expectations of a 25-basis-point rate hike at the Fed's December 9 meeting, with markets fully pricing in such a move, according to CME FedWatch.

Reuters reported that Goldman Sachs expects a third rate increase in March rather than January, anticipating that inflationary pressures will ease towards the end of the year before seasonal price increases at the beginning of the new year push inflation higher again.


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The brokerage now expects the Fed to begin cutting interest rates in December 2027, three months later than its previous forecast. It has also projected further rate reductions in March, June and September 2028, Reuters reported.

Inflationary pressures have been fuelled by rising oil prices amid the US-Israel conflict with Iran, import tariffs imposed by President Donald Trump, resilient consumer spending and substantial investment in artificial intelligence infrastructure.

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Reuters reported that persistent increases in living costs have also become a political challenge for the Trump administration, contributing to voter dissatisfaction and significant midterm election losses suffered by Trump's Republican Party last week.

Goldman's revised outlook signals that persistent inflation could force the Federal Reserve to maintain a restrictive monetary policy for longer than previously anticipated, potentially delaying the start of its interest rate easing cycle.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)