US Economics Analyst September FOMC Preview A Hike Without a Signal

Economics Research 13 September 2026 | 10:15PM EDT

September FOMC Preview: A Hike Without a Signal?

n We added a 25bp rate hike at this week’s September FOMC meeting to our David Mericle | forecast last Friday following the August CPI report. The report had little impact Goldman Sachs & Co. LLC on our inflation view but pushed market pricing of a hike to nearly 90%, high enough that the FOMC will likely want to avoid the market reaction that would likely follow from remaining on hold. We continue to expect two cuts in 2027 but now expect them in September and December (vs. June and December previously). We have also raised our forecast for the terminal rate to 3.25-3.5% (vs. 3-3.25% previously). n We do not see a strong economic case for raising the funds rate. We think that all of the overshoot of 2% can be attributed to one-time factors whose impact is likely to fade, that the improvement in core PCE inflation to a roughly 2.5% pace over the last three months is an early sign of this, that high inflation looks broad-based mainly because of tariff effects, that inflation expectations are not at immediate risk of unanchoring, and that the economy is not overheated, which is the usual rationale for raising rates. We think that some FOMC participants will sympathize with these points and as a result will be reluctant to signal any additional hikes. n We expect the FOMC to make only the minimum necessary change to its statement, which will likely note that it is hiking to return inflation to 2% but will likely avoid providing guidance on the path forward or the criteria for further hikes. We expect Governor Waller to dissent because the latest inflation numbers have been below the threshold for a hold he set in a recent appearance. n We suspect that the FOMC will want to nudge the market away from pricing an October hike too confidently but will not do it in the statement. Instead, Chairman Warsh could say in his press conference that before deciding on further steps, the FOMC will “carefully assess” incoming data or will want to see upcoming inflation reports (plural) or how the underlying inflation trend evolves, all of which would hint at waiting a bit longer to collect more information. n The economic projections are likely to show slightly lower headline and core inflation, mainly reflecting an expected downward revision from methodological changes later this month. n The key question for the meeting is whether the median dot will show one hike or two in 2026. We expect a 10-8 majority to show one hike because some

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Goldman Sachs US Economics Analyst

participants might be ambivalent about the first hike and some might want to avoid pushing market expectations any higher. But we see a risk of a majority for two hikes if more participants than we expect see a hike this week as a normal response to higher oil prices and AI demand and the start of a series of rate hikes. n Even with the weight we put on the risk that the FOMC could ultimately deliver two or three hikes instead of our expectation of one, our probability-weighted forecast for the fed funds rate through the end of next year is considerably less hawkish than market pricing.