The Fed meets today, October 28. Markets are pricing in four more rate hikes, but Goldman Sachs expects only two, with December being the last one 👀
Why Goldman Sachs is more sanguine than the market: Core PCE inflation is 1.1 percentage points above target, but the firm believes the entire overshoot is due to three temporary factors:
- Tariff pass-through is fading
- The Iran energy shock is limited
- AI-related price pressures will peak and then ease in 2027. As these three factors fade, inflation will return to target on its own, without the Fed needing to tighten much further.
The thing to watch is the wording of the statement: Goldman Sachs expects the Fed to use language tying every decision to “the evolving data and outlook”—a signal that it will wait and see, with no commitment about which month it might hike again.
If Warsh sounds more dovish than expected, markets could react positively.
Risks to this scenario: a sharp rise in oil prices due to an escalation involving Iran, or the “January effect” reigniting inflation at the start of 2027.
In short, today’s meeting is nothing out of the ordinary, but markets will scrutinize every word of the statement.
Why Goldman Sachs is more sanguine than the market: Core PCE inflation is 1.1 percentage points above target, but the firm believes the entire overshoot is due to three temporary factors:
- Tariff pass-through is fading
- The Iran energy shock is limited
- AI-related price pressures will peak and then ease in 2027. As these three factors fade, inflation will return to target on its own, without the Fed needing to tighten much further.
The thing to watch is the wording of the statement: Goldman Sachs expects the Fed to use language tying every decision to “the evolving data and outlook”—a signal that it will wait and see, with no commitment about which month it might hike again.
If Warsh sounds more dovish than expected, markets could react positively.
Risks to this scenario: a sharp rise in oil prices due to an escalation involving Iran, or the “January effect” reigniting inflation at the start of 2027.
In short, today’s meeting is nothing out of the ordinary, but markets will scrutinize every word of the statement.
