Goldman Sachs has officially delayed its forecast for the Federal Reserve’s second interest rate hike from October to December 2026. The investment bank’s revision followed the release of the August Personal Consumption Expenditures (PCE) inflation report on September 30, 2026, which came in cooler than market expectations.
The core PCE index rose just 0.25% in August compared to July. On an annualized, year-on-year basis, the key policy gauge reached 3.01%. Both the monthly and annual inflation figures came in below economists’ estimates, signaling that price pressures are gradually easing.
In response to the softer data, Goldman analysts now project core PCE will settle at 3% in the fourth quarter of 2026. The bank’s forecast stands 0.4 percentage points below the Fed’s median projection of 3.4%.
Odds of a Pause Strengthen
Goldman’s updated timeline aligns with fading market expectations for an immediate rate hike. The CME FedWatch tool showed the probability of an October hike plunging to 49.3% as of September 29, down sharply from 70.9%. New York Fed President John Williams previously shared a similar view, stating that the committee feels no urgency to raise borrowing costs again right after September’s policy move.
At its September 16 meeting, the Fed decided to raise its benchmark rate by 25 basis points to a target range of 3.75%-4%, marking the central bank’s first rate increase since July 2023. At the time, median projection materials revealed that 16 of the 18 FOMC participants were still penciling in at least one more rate hike before the end of 2026.
Backed by the latest inflation figures, Goldman now sees a strong chance that the FOMC will ultimately conclude no further rate hikes are needed after December. This view comes as the government revised US second-quarter GDP growth upward by 0.7 percentage points to an annualized 2.2%, buoyed by resilient domestic consumption and solid investment inflows.
Growth momentum could slow in the subsequent quarter, however. Goldman trimmed its third-quarter US GDP growth forecast by 0.1 percentage point to 3.3% following a report showing the goods trade deficit widened beyond analysts’ expectations.
Bitcoin Held Back by Bonds
News of easing inflation provided an initial spark across crypto markets. Bitcoin surged past the $85,000 mark in response to August’s PCE figures, which hinted at potential monetary relief.
The rally failed to hold near its peak, however. Bitcoin’s gains were eroded by persistently high yields on government debt. US Treasury yields refused to back down from recent highs; the 10-year Treasury yield held at 5.28%, while the 30-year long bond stood at 5.62%.
Elevated sovereign bond yields have created a barrier for fresh capital entering crypto markets. Investors continue to weigh risk-free dollar yields against digital assets, keeping Bitcoin from building sustainable upward momentum in this environment.
Reported via crypto.news.
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Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
