Goldman Sachs Predicts More US Fed Interest Rate Rise in October Following First Rise Since 2023

US Federal Reserve hiked interest rates for the first time since 2023, and Goldman Sachs is expecting a further rise in the interest rate at the earliest in October. 

In an effort to control inflation above its 2% target for more than five years, the US Federal Reserve has hiked its interest rate, following the previous decision of not altering rates at its last meeting in July. 

Following this rate hike, Goldman Sachs now predicts a 25-basis-point hike at the upcoming meeting of Fed in late October. This prediction by Goldman Sachs is not the same as that of economists cited in the report, who are expecting a steady interest rate at the meeting which is only a week prior to US midterm elections. 

The case for another increase rests largely on the Fed’s continuing effort to bring inflation back towards its target. Goldman Sachs considers October the most likely timing for the next move because consecutive increases would be consistent with the central bank’s stated aim of supporting a more timely return to 2% inflation. 

The latest rate decision also comes as the US economy shows signs of picking up pace. Fed Chairman Kevin Warsh indicated that economic activity has gathered momentum since the July meeting, while inflation has shown little evidence of cooling sufficiently. 

The global backdrop has added another layer to the Fed’s decision-making. Other central banks have also been raising interest rates amid global turmoil and higher gas prices. 

The Fed’s move has drawn criticism from US President Donald Trump, who has repeatedly argued for substantially lower borrowing costs. Following the latest decision, Trump maintained that US interest rates should be at 1% or below and criticised the central bank’s approach. 

Trump had also frequently clashed with Warsh’s predecessor, Jerome Powell, over the level of interest rates during Powell’s tenure as Federal Reserve chair. 

Attention now moves to the Fed’s late-October meeting. Goldman Sachs is looking for another quarter-percentage-point increase, while the economists cited in the report largely expect a pause. The eventual decision will come as policymakers continue to weigh persistent inflation against the strength of the US economy.