Goldman Says Markets Too Hawkish on Betting Fed Will Hike Rates - Bloomberg.com

“Goldman Sachs warned that investors are over‑estimating the probability of a September Federal Reserve rate hike, arguing that the market’s hawkish stance is not aligned with the central bank’s current data outlook. The firm expects inflation to stay above target but sees the labour market cooling enough to keep policy steady through the third quarter, reducing the odds of a rate increase in September. This assessment suggests that U.S. equities could benefit from lower volatility, while mortgage‑backed securities may see modest price appreciation as rate‑sensitive borrowers anticipate steadier financing costs. Consumer borrowing costs are likely to remain near‑current levels, easing pressure on household budgets and potentially supporting continued retail spending. Expert Analysis: Goldman’s view underscores a growing disconnect between market pricing and the Fed’s data‑driven approach, which could lead to a short‑term rally in rate‑sensitive sectors if investors recalibrate expectations. Should the Fed hold rates, the reduced uncertainty may also temper the recent surge in Treasury yields, providing a more stable environment for corporate financing and consumer credit.”