Goldman Sachs Sees Little Chance of a September Fed Rate Hike

Weakening economic indicators have led Goldman Sachs to reduce its expectations for a Federal Reserve rate hike in September, a development that could support bullish sentiment around bitcoin.
Goldman Sachs now considers a September rate increase “very unlikely,” potentially providing a positive catalyst for bitcoin, which has been stuck in a relatively tight trading range since early July.
Bitcoin was trading near $63,500 at the time of writing, up about 1% since midnight UTC. The cryptocurrency has remained between roughly $62,000 and $66,000 for more than a month.
Goldman revised its outlook after a series of weaker economic readings, including retail sales and employment data, alongside signs that inflation is cooling, Chief Economist Jan Hatzius told clients, according to Bloomberg.
Hatzius said the bank expects inflation to continue improving rather than accelerate again as the year progresses, adding that financial markets still appear to be pricing in a more aggressive path for interest rates than Goldman expects.
Interest rates play a major role in determining credit conditions and the amount of liquidity available across the economy, which can influence demand for risk assets such as bitcoin. Higher rates have historically weighed on cryptocurrencies, as seen during the Fed’s aggressive tightening cycle in 2022.
Conversely, expectations for lower rates can support risk assets, similar to the crypto market’s strong recovery following the Federal Reserve’s response to the COVID-19 market crash in March 2020.
CME FedWatch data showed traders assigning a 30.6% probability to a 25-basis-point Fed rate hike in September, which would lift the target range to 3.75%-4%. Most traders currently expect rates to remain unchanged.
Expectations for a September hike declined after last week’s data showed inflation continuing to moderate in line with forecasts.