Goldman Sachs Delays Fed Rate Hike Forecast to December After Softer PCE Inflation

The Quick Take

• Goldman Sachs revised its US Fed rate hike forecast from October to December 2026 after August PCE inflation printed at 3.4%, below economist consensus.
• The PCE is the Fed's preferred inflation gauge — a softer reading gives the central bank flexibility to hold before its next tightening move.
• Goldman's forecast shift reduces near-term pressure on equity valuations and emerging market currencies including the Indian rupee.

Goldman Sachs has revised its US Federal Reserve rate hike forecast from October to December 2026, following an August personal consumption expenditures price index reading of 3.4% annually — below economist consensus expectations. The PCE is the Federal Reserve's preferred inflation gauge, and a softer-than-expected reading provides the central bank with more flexibility to hold rates before executing the next tightening move. Goldman's research team, among the most closely monitored on Wall Street for Fed policy forecasting, updated its base case to reflect the data-dependent stance Fed officials have emphasized in recent communications about their approach to the rate cycle.

The delay in Goldman's hike forecast has direct implications across multiple asset classes: a later rate hike reduces near-term pressure on equity valuations, provides relief to rate-sensitive sectors including real estate and utilities, and compresses the US dollar near-term as the tightening timeline recedes. For bond markets, the Goldman forecast shift suggests current yield levels at the long end already price significant future tightening — a December hike delay could trigger a partial Treasury bond rally if other banks follow Goldman's revision. Emerging market equities including India, Brazil, and Southeast Asian markets benefit most from any reduction in US yield pressure that lessens FII outflow incentives.

The key forward signal is the US September CPI and PCE data releases: if September inflation re-accelerates to or above the August level, Goldman will likely reverse its December hike forecast back to October and markets will reprice sharply. The macro variable is the persistence of service sector inflation — the PCE services ex-housing component has been the most stubborn part of the US inflation basket, and any acceleration there would undermine the data that gave Goldman the basis for pushing its hike call to December. Watch Federal Reserve meeting minutes for any dissent around the timing flexibility Goldman's revised forecast implies.

Synthesized from 1 source.