Goldman Sachs: September Fed Rate Hike ‘Very Unlikely’ — Here’s Why

Goldman Sachs has told clients that a Federal Reserve interest-rate increase at the September meeting is “very unlikely,” according to a note released this week. The investment bank’s assessment, based on recent economic data and Fed communications, suggests the central bank will hold rates steady as it seeks to balance inflation control with a cooling labor market.

Why Goldman Sachs sees no September hike

Goldman Sachs economists point to a combination of factors that make a move in September improbable. Recent inflation readings have shown a continued, if gradual, slowdown, while the labor market has shown signs of softening, including a rising unemployment rate and slower wage growth. The bank also notes that Fed officials have signaled a patient approach, preferring to wait for more data before adjusting policy.

As of early September 2025, market futures pricing reflects only a minimal probability of a rate hike, with the vast majority of traders expecting rates to remain unchanged. Goldman’s view aligns with this market consensus, though the bank acknowledges that a surprise data print could alter the outlook.

Implications for markets and borrowers

If the Fed holds rates steady, it would mark the third consecutive meeting without a change, following a series of hikes that brought the federal funds rate to a two-decade high. For consumers, that means borrowing costs on mortgages, auto loans, and credit cards are likely to stay elevated in the near term. For businesses, it provides a measure of certainty in planning, though the cost of capital remains high.

Equity markets have generally welcomed the prospect of a pause, as it reduces the risk of a policy-induced economic slowdown. However, Goldman Sachs cautions that the longer rates stay high, the greater the risk of a sharper economic deceleration later.

What this means for investors

Investors should focus on the broader trajectory of monetary policy rather than a single meeting. Goldman Sachs expects the Fed to begin cutting rates in the first half of 2026, assuming inflation continues to moderate. That expectation has already influenced bond yields and equity valuations, making it a key factor to watch.

For now, the central bank’s stance appears to be one of watchful waiting. The next significant signal will come from the Fed’s own economic projections, due to be released at the September meeting, which will offer a clearer picture of where policymakers see rates heading.

Conclusion

Goldman Sachs’s view that a September rate hike is “very unlikely” reflects a broader consensus that the Fed will hold steady as it assesses the economy. With inflation easing and the labor market cooling, the central bank has room to pause, but the path forward remains data-dependent. For markets and borrowers, the immediate focus shifts to the Fed’s projections and any hints of future easing.

FAQs

Q1: Why is a September Fed rate hike considered unlikely?
Recent inflation data has been moderate, and the labor market is showing signs of cooling, leading analysts like Goldman Sachs to expect the Fed to hold rates steady at the September meeting.

Q2: What would a rate pause mean for consumers?
Borrowing costs for mortgages, auto loans, and credit cards would remain at current elevated levels, but no new increase would occur, providing some stability for borrowers.

Q3: When might the Fed start cutting rates?
Goldman Sachs projects the first rate cuts could come in the first half of 2026, assuming inflation continues to ease and economic growth remains stable.