Goldman Sachs chief economist Jan Hatzius told clients this week that a Federal Reserve rate hike at the September 15-16 meeting has become “very unlikely,” arguing that markets remain too hawkish even as the economic data softens. His call landed just as CME FedWatch odds of a 25 basis point hike fell to roughly 30%, down sharply from above 60% earlier in the month. Bitcoin and U.S. stock futures both ticked higher on the news, a sign traders are already leaning into Goldman’s read.
Hatzius pointed to three straight months of underwhelming data — soft retail sales, weaker payrolls, and cooling inflation prints — as reasons the Fed’s more dovish members have no incentive to shift toward tightening. Goldman’s baseline case now has the Fed holding its federal funds target at 3.50%-3.75% through the rest of 2026, with the next possible hike pushed out to January 2027. Notably, traders had fully priced in a December hike as recently as last week; that expectation has now unwound almost completely. Goldman also expects the Treasury yield curve to steepen from here, even with two-year yields still holding above 4%.
For investors, this shift matters most for rate-sensitive sectors — regional banks, REITs, homebuilders, and small-cap stocks — that tend to benefit when hike risk recedes. It also removes a key overhang for growth and tech stocks that had been pricing in tighter-for-longer policy. That said, Goldman’s own note flags plenty of data between now and the September meeting that could move the needle again, including the next CPI print and FOMC minutes. Investors positioned for a hike-driven pullback may want to reassess hedges, while those holding rate-sensitive names have a real tailwind if Goldman’s call proves right.
