Goldman Sachs and J.P. Morgan Chase join forces! The persistent problem of inflation and the impact of 100 yuan oil prices. Is the Fed's interest rate hike in September a foregone conclusion?

The Zhitong Finance App learned that Goldman Sachs and J.P. Morgan currently anticipate that the Federal Reserve will raise interest rates this week. The previous series of higher-than-expected inflation data challenged the market's hopes that “price pressure will continue to ease without further policy tightening”.

According to data released last week, the increase in US consumer prices and producer prices in August both exceeded expectations, while oil prices climbed to more than $100 per barrel due to another escalation of hostilities in the Middle East. Since then, these two Wall Street banks have joined a growing number of forecasters that have turned their positions more hawkish.

In a report released last Friday, Goldman Sachs abandoned the previous forecast of “keeping interest rates unchanged”. Currently, the Federal Reserve is expected to raise interest rates by 25 basis points at the September 15-16 meeting. Meanwhile, J.P. Morgan predicts that the Federal Reserve will raise interest rates by 25 basis points each in September and December.

The latest data has raised concerns that the Federal Reserve's progress towards the 2% inflation target may stall after months of slowing inflation.

Goldman Sachs economist David Merrick said, “We believe the Federal Open Market Committee (FOMC) will not want to surprise the market.”

Following the release of the inflation report, J.P. Morgan Chase gave a similar hawkish tone.

An economist at J.P. Morgan Chase, led by Michael Ferrori, said in a report: “During this week, bond yields and energy prices have both risen, and the inflation data is strong enough, making next week's FOMC meeting more likely than no rate hike.”

This week, as policymakers end their meeting on Wednesday, the prospects for the Federal Reserve to further tighten policy will be the focus of attention; at the same time, investors are also watching the policy signals released by the Bank of Japan.

J.P. Morgan said that the latest inflation data questioned the continuing downward trend in inflation, so the bank predicted that the Federal Reserve would raise interest rates again this year and raised its forecast for long-term policy interest rates to 3.25%.

According to the CME (CME) Federal Reserve's observation tool, the market currently expects the probability that the Fed will raise interest rates by 25 basis points this month to be 87%, up from about 70% before the latest inflation data was released, and it is expected that interest rates will be raised again in December.

Goldman Sachs added in a separate research report last Sunday that although the time point is later than previously predicted, it still expects the Federal Reserve to cut interest rates twice in 2027 because Goldman Sachs believes that this week's interest rate hikes are more driven by market pricing than by the fundamentals of inflation.