Goldman Sachs expects the Federal Reserve to pause in October and possibly raise interest rates again in December

According to a Goldman Sachs report, the Federal Reserve is expected to pause interest rate hikes at the October meeting, but may implement the last rate hike of this cycle in December. Goldman Sachs pointed out that since September, the financial conditions index has tightened by about 30 basis points, which is insufficient to replace further rate hikes; the market should not interpret the tightening of financial conditions as a signal that the rate hike cycle is about to end.

Goldman Sachs expects that as the impacts of tariffs, energy shocks, and AI-related price pressures gradually dissipate, U.S. inflation will improve by 2027, and under the baseline scenario, the Federal Reserve will not raise rates in March 2027. However, if the situation in the Middle East escalates and drives oil prices further up, the inflationary pressures may still change the subsequent policy path.