Goldman Sachs pushes back Fed rate hike forecast to December

Goldman Sachs has pushed back its forecast for the next US interest rate increase to December from October, after a softer-than-expected inflation reading cooled expectations that the Federal Reserve would tighten again next month.

The brokerage had previously projected a 25-basis-point increase in October. "We are pushing back the second hike in our forecast to December, and we see a strong chance that the FOMC will ultimately conclude that additional rate hikes are unnecessary," Goldman Sachs said in a note on Wednesday.

The revision followed data on Wednesday showing US inflation rose less than anticipated in August. The personal consumption expenditures price index increased 3.4% on an annual basis, below the 3.7% estimate of economists polled by Reuters.

The Fed raised rates in September, its first increase in three years and the first policy move under new chair Kevin Warsh, as it sought to tackle inflation. On Tuesday, Federal Reserve Bank of New York President John Williams said the central bank had time to weigh the data before deciding when to raise rates again.

Rate futures markets now reflect about a 38% probability of a quarter-percentage-point increase in October, according to CME Group's FedWatch Tool, down from roughly 51% in the prior session and nearly 71% a week ago. Market participants are focused on the September US nonfarm payrolls report due on Friday.