Goldman Sachs now expects the U.S. Federal Reserve to raise interest rates by another 25 basis points in October, making it one of the first major Wall Street banks to forecast consecutive rate hikes after the central bank signalled a more hawkish policy stance.
The revised call marks a shift from Goldman Sachs' earlier view that the Fed had completed its tightening cycle after delivering a quarter-point rate increase in September.
Read more: Global Market Today: Asian stocks tick higher as markets weigh further Fed hikes
According to Reuters, Goldman said the Fed's latest rate projections, which showed a strong majority of policymakers anticipating at least one more increase this year, pointed to a two-hike baseline for 2026.
Goldman identified October as the most likely timing for the next rate increase, citing the Fed's emphasis on bringing inflation back to its 2% target in a more timely manner.
Read more: US Fed chair Kevin Warsh explains why the Federal Reserve raised interest rates
The Fed raised its benchmark interest rate by 25 basis points on Wednesday to a range of 3.75%-4.00%. Goldman described the meeting as more hawkish than expected, pointing to policymakers' rate projections, an upward revision to estimates of the neutral interest rate and comments from Chair Kevin Warsh indicating that the latest move had only partially reduced the degree of policy accommodation.
Market expectations also shifted after the Fed's decision. Traders now see roughly a 50% probability of another quarter-point rate increase in October, according to CME Group's FedWatch tool.
Reuters reported that Goldman's revised outlook leaves Bank of America Global Research as the only other major brokerage expecting a more aggressive tightening path. BofA forecasts rate increases in both October and December.
Investors will also be watching monetary policy decisions from the Bank of England later on Thursday and the Bank of Japan on Friday for further signals on the direction of global interest rates.
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