Goldman Sachs (GS) now expects more interest rate hikes from the U.S. Federal Reserve than it previously forecast.
The Wall Street investment bank has added another rate hike in March 2027 following a hot inflation report in the U.S. for the month of October.
Economic data showed October’s core inflation rate reached 3.75%, higher than analysts had anticipated and well above the U.S. Federal Reserve’s annualized 2% target.
Financial markets are now pricing in a 100% chance that the U.S. central bank will raise interest rates another 25 basis points at its Dec. 9 policy meeting.
Goldman Sachs economist David Mercile says the rate hikes are likely to continue into 2027.
Mericle expects the Fed to increase interest rates in December and signal another likely hike in March 2027.
Mericle writes in a note to clients that stubborn inflation and cost pressures leave the Fed little choice but to tighten monetary policy.
However, Goldman Sachs expects inflation to subside considerably by the end of next year. As such, the bank sees the Fed starting to lower interest rates beginning in late 2027.
By mid-2028, Mericle sees the Fed’s terminal rate in a range of 3.25% to 3.50%, down from 3.75% to 4% currently.
The revised outlook for interest rates at Goldman Sachs also comes after Fed Governor Chris Waller recently said he might support a 50-basis point rate increase at the Dec. 9 meeting.
GS stock has risen 12% in the past year to trade at $910.19 U.S. per share.
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