Goldman Sachs: September Rate Hike Is ‘Very Unlikely’
- Weak economic readings have prompted Goldman Sachs to significantly reduce the odds of a Federal Reserve rate hike in September, potentially improving the backdrop for bitcoin.
- The investment bank now considers a September increase “very unlikely,” which could provide support for bitcoin as it continues to trade within a narrow range.
- Bitcoin was trading near $63,500, up roughly 1% since midnight UTC. The cryptocurrency has remained between $62,000 and $66,000 for more than a month.
- Goldman’s revised view follows weaker retail sales and employment data, along with signs of cooling inflation, according to Chief Economist Jan Hatzius, as reported by Bloomberg.
- Hatzius said Goldman expects inflation to continue easing through the rest of the year rather than picking up again. He also said current market pricing reflects a more hawkish outlook for Fed policy than the bank believes is warranted.
- Federal Reserve interest rates affect borrowing costs and the availability of liquidity, influencing investor demand for risk assets such as bitcoin. Rate increases have historically pressured cryptocurrencies, particularly during the Fed’s aggressive tightening campaign in 2022.
- Expectations for easier monetary policy can have the opposite effect by supporting liquidity and risk appetite, as demonstrated by the crypto market rally that followed the Fed’s response to the COVID-19 shock in March 2020.
- CME FedWatch data showed traders pricing in a 30.6% probability of a 25-basis-point increase in September, which would lift the target federal funds range to 3.75%-4%.
- The majority of traders expect the Fed to leave rates unchanged, with expectations for a September hike falling after recent inflation figures showed price pressures cooling in line with forecasts.
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