Goldman Sachs analysts argue that market expectations of a Federal Reserve rate hike are too elevated, with market-implied odds around 45% versus the bank’s own estimate of roughly 25%. The bank’s arguments rest on cooling inflation, with July 2026 CPI at 3.4% year-over-year, softening wage growth below 2% annualized, and inflation expectations remaining anchored. Goldman also contends that the current oil supply shock is considerably smaller than historical episodes that prompted Fed action. The firm’s base case is that the Fed keeps its target rate in the 3.50% to 3.75% range through 2026, with potential rate cuts delayed until June or December 2027.
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