Goldman adds another rate hike to Fed outlook after hot inflation data

Goldman Sachs forecast ​a 25-basis-point Federal Reserve rate increase ‌in March ​on Tuesday after hotter-than-expected October inflation data prompted it to change its call for an end to the ‌hiking cycle in December.

The US lender joins Deutsche Bank, which expects an additional quarter-point rate hike in January on top of increases in December and March. Tuesday's inflation data ‌marked a third consecutive month of upside surprises, with markets fully expecting a ‌25-basis-point hike on December 9, per CME FedWatch.

Inflation has been rising on the back of higher oil prices amid the Iran war, US President Donald Trump's import tariffs, resilient consumer demand and robust ⁠AI investment. Higher ​living costs added ⁠to voter dissatisfaction, contributing to heavy midterm election losses for Trump's Republican Party last week.

Goldman said a ⁠third rate hike is more likely in March than January, as it expects inflation to ​ease through the end of the year before renewed "start-of-the-year" price pressures amid elevated ⁠costs lift inflation again. "It is possible that by the time of the March meeting, or even the ⁠January ​meeting, the energy shock will feel largely over. But we suspect that the recent inflation readings will lead most FOMC participants to signal a third ⁠hike in the December dot plot," Goldman Sachs chief US economist David Mericle said.

The brokerage ⁠now expects rate ⁠cuts to begin in December 2027, three months later than previously forecast, followed by additional cuts in March, June and September ‌2028.