GS CAS Views The July FOMC – Goldman’s Take from Traders and Research

GS CAS Views: The July FOMC – Goldman’s Take from Traders and Research

GS CAS Views: The July FOMC – Goldman’s Take from Traders and Research All references to "we/us/our" refer to the views and observations of the GS Trading or Research Desks, as noted. All mistakes are our own.

Views from GS US Economics Research Team

• We expect the FOMC to leave the fed funds rate unchanged at its July meeting. The statement might acknowledge the upside risks to inflation posed by renewed geopolitical conflict, and there will likely be at least one dissent in favor of a hike. Market pricing implies that investors see the outcome of the July meeting as unusually uncertain, likely because the FOMC has been split recently, Chairman Warsh’s own position remains unclear, and some of the re-escalation with Iran occurred during the blackout period. But most voters appear unlikely to push for a hike next week after the softer June inflation data, the Fed has historically avoided delivering surprise rate hikes, and we suspect that voters might be especially reluctant to do so at a meeting without a Summary of Economic Projections.

• Despite the rebound in oil prices, we continue to think that the combined impact of tariffs, the war, and AI effects on monthly inflation should diminish in the months ahead, leaving core inflation soft enough for the FOMC to stay on hold through the end of the year. We see little margin for error on inflation and suspect that continued conflict could influence the rate hike debate more than the oil passthrough math alone implies by adding to concerns that supply shocks could continue and can come back unpredictably even after they appear over.

• We are skeptical that modest rate hikes would provide much of a disinflationary offset to the impact of supply shocks. We suspect Fed officials would agree, but if the inflation news does not continue to improve as we expect, some might still see it as important for the Fed to respond to avoid the public misperception that it accepts high inflation.

Full FOMC Preview Piece from GIR: here

Source: Marquee PlotTool Pro as of 28 Jul 2026, access plot HERE

Views from GS Trading and Strategy Desks

All of the below are written as of 27Jul26 market close and are subject to market movements Rates:

• The focus in the front end has been on the cheapening in July, from a low of 2.5bps priced to 9.5 at peak. While a number of commentators/competitors have vocally pitched the argument for a surprise hike, we attribute the move more to a combination of offsides positioning (2x Jul vs 1x Sep has been the trade du jour post cpi), in addition to what felt like a wave of fomo from the hf community who largely views July pricing as self-referential and increasingly asymmetric should the jump approach 12bps. Fed speak has been uniformly hawkish over the past few weeks, and comments from Logan & Hammack suggest that at least two (and presumably a third given Kashkari joined their dissent in May) regional presidents will vote for a hike this week. With that said, the board almost certainly submitted more dovish dots than regionals, and we place considerable weight on Waller’s two speeches this month: first outlining the importance of a credible reaction function, and the second providing his definition: a hot cpi reading would necessitate a hike. The market appears to be conflating a lack of forward guidance with deliberate obfuscation – we take Waller at his word, and if the Board is not voting to hike, the hawks simply do not have the numbers. Beyond the decision itself, we struggle to see a world where Gov. Warsh does not deliver a hawkish hold and implicitly tee up a September hike. Given the recent re-escalation in the Middle East and corresponding drift higher in oil prices, the bar for a 25bp core reading in one of the next two cpi prints feels low, and conditional on a hold in July we believe it will only take one to confirm the September hike. Taking a step back from the idiosyncrasies of meeting jumps, terminal pricing above 50bps cumulative thru March/April 2026