Full Breakdown
Goldman Sachs Says September Fed Rate Hike Highly Unlikely
8/19/2026, 11:16:15 AM
Core Event – Hatzius’ Dovish Outlook
Goldman Sachs chief economist Jan Hatzius issued a research note on August 16 stating that a Federal Reserve rate increase at the September 15-16 meeting is “extremely unlikely.” He argued that weak retail sales, soft employment data, and decelerating inflation remove any incentive for the Federal Open Market Committee (FOMC) to raise rates. He added that market pricing for the federal funds rate remains “overly hawkish” and that the Treasury yield curve is expected to steepen as expectations for further hikes retreat.
Background & Context – Prior Market Expectations
Until a few weeks ago, Wall Street was pricing in two additional Fed hikes before the end of 2026, with a September increase viewed as “all but a sure thing.” Market odds for a September hike were roughly 70 % according to CME FedWatch data. By early August, those odds fell to about 30 %, and the next 25-basis-point move shifted from December to January.
Data & Statistics – Recent Economic Indicators
| Indicator | Recent Reading | Trend |
|---|---|---|
| Retail sales (July) | Down 0.6 % month-on-month – U.S. Department of Commerce, August 14 | Weakening demand |
| Non-farm payrolls (July) | -23,000 jobs – August 7 | Negative growth |
| CPI (July YoY) | 3.4 %, matching expectations, down from 3.5 % in June | Inflation easing |
| PPI (YoY) | 4.7 %, down from 5.5 % in June | Cost pressures easing |
| Two-year Treasury yield | Fell about 20 bp since July 23, now around 4.1 % | Lower near-term expectations |
| Market odds for a September hike | Approximately 30 % (CME FedWatch) | Dovish shift |
Official Statements & Responses – Goldman Sachs and Market Pricing
- Business Insider reported market odds now show a 69 % chance the Fed will hold rates steady in September.
- InvestingLive noted CME FedWatch places the probability of a 25-bp hike at 3.75-4 % for September, down after the softer July inflation print.
- TradingKey highlighted that traders have pushed back expectations for the next hike to January, a retreat from the prior week’s December expectation.
Conflicting Reports & Gaps – Variation in Market Odds
Sources differ on the precise probability of a September hike. Business Insider cites a 69 % chance of a hold (implying a 31 % chance of a hike), while InvestingLive and TradingKey reference CME FedWatch data that puts the hike probability at roughly 30 %. Both figures stem from the same underlying market pricing tools but are presented with slightly different baselines. No additional data on the Fed’s internal deliberations or upcoming minutes is available.
What’s Next – Upcoming Fed Meeting and Potential January Hike
The Federal Reserve’s September 15-16 meeting is scheduled to decide on monetary policy. Market participants expect the Fed to maintain the current target range, with the next 25-basis-point increase now projected for January of the following year, contingent on further economic data. Goldman Sachs will continue monitoring retail sales, employment, and inflation trends as the primary drivers of any policy shift.
