Goldman Sachs pushes Fed rate hike forecast to December

Goldman Sachs now expects the next US interest rate increase in December rather than October, according to Business Recorder. The brokerage made the change after a softer-than-expected inflation reading reduced expectations that the Federal Reserve would tighten again next month. Before this, the firm had penciled in a 25-basis-point rise for October.

In a note issued on Wednesday, Goldman said it sees a good prospect that policymakers will ultimately judge further increases unnecessary. The Fed lifted rates in September for the first time in three years, a move made under its new chief, Kevin Warsh, to address price pressures.

Wednesday's figures revealed a smaller-than-forecast rise in US prices during August, with the personal consumption expenditures gauge reaching 3.4% year on year, compared with a 3.7% estimate from economists polled by Reuters. Market pricing now points to roughly a 38% chance of a quarter-point hike in October, according to the CME Group FedWatch Tool, down from about 51% a session earlier and nearly 71% a week ago. Investors are now watching the September nonfarm payrolls report, which is scheduled for Friday.