Fed rate hike seen in October as Goldman Sachs signals firmer inflation

Goldman Sachs now expects the US Federal Reserve to lift interest rates again by October. The bank forecasts another 25-basis-point hike after the Fed’s latest policy move. This view replaces its earlier call that rate rises were likely finished. Goldman Sachs also pointed to a firmer inflation stance in fresh projections.

The Federal Reserve raised its benchmark rate by 25 basis points on Wednesday. The target range moved to 3.75%–4%. It was the first increase since 2023. Policymakers are still dealing with inflation above the central bank’s 2% target. Markets had earlier hoped September marked the cycle’s peak.

Goldman Sachs based the shift on the latest meeting tone and updated forecasts. A strong majority of policymakers pencilled in at least one more rise this year. Goldman Sachs described a possible "two-hike baseline" for 2026. The bank linked this to projections and inflation risks that looked stronger than expected.

Goldman Sachs also flagged timing. Mint reported that October looked like the clearest window. The Fed has signalled more tightening may be needed to reach 2% sooner. That guidance mattered because investors were leaning towards a pause after September. The reassessment has raised debate on what the Fed does next.

Investors have adjusted quickly after the decision. CME Group’s FedWatch tool showed markets pricing about a 50% chance of an October quarter-point rise. The October meeting lands close to the US midterm elections. That timing adds uncertainty for traders who track Fed communication and political risk together.

Item	Latest detail
Fed target range after latest hike	3.75%–4%
Size of latest increase	25 basis points
Market-implied October hike probability	About 50%

October rate hike and Goldman Sachs: split views and market impact

There is also a divide inside Goldman. Goldman Sachs economists see October as the most likely step. Kay Haigh of Goldman Sachs Asset Management has said the Fed could skip October. The reason is the meeting’s closeness to elections. Investors now watch whether officials wait for more inflation and growth data.

A further US rate rise can keep financial conditions tight and move global prices. Equities, bonds, currencies, and commodities can all react to US yields. For India and other emerging markets, higher US rates can affect flows. A stronger dollar and higher Treasury yields may reduce demand for risk assets.

Gold often stays sensitive to the expected Fed path. Higher rates raise the cost of holding non-yielding gold. Still, geopolitical risk and inflation views can offset that pressure at times. For now, Goldman Sachs is positioned for another 25-basis-point move, while pricing shows uncertainty on timing.