Goldman Ups Tightening View On Hawkish Fed Commentary And Data

:Goldman Sachs yesterday evening raised its call for the Fed hiking path: they now see a 75bp hike this month (was 50), and 50bp in November (was 25), while retaining their view that December's 25bp increase would mark the final raise of the cycle (ending the year at 3.75-4.00%).

• Although that hiking path merely brings Goldman closer to current market pricing, changing the call now is perhaps slightly bold ahead of today's comments by Fed Chair Powell and, more importantly, Tuesday's potentially decisive August CPI release.
• Why now? They write that the case for slowing hikes hasn't yet been met: "the data have on net come in roughly as expected or even a bit more supportive than expected of the case for slowing down. But Fed officials have sounded hawkish recently and have seemed to imply that progress toward taming inflation has not been as uniform or as rapid as they would like".
• They also nod to the WSJ Timiraos article yesterday saying that the FOMC “appears to be on a path to raise interest rates by another 0.75 percentage point this month". Furthermore, GS notes that there's been little public FOMC pushback against 75bp expectations.
• Goldman's terminal 3.75-4.00% rate expectation is now in line with market pricing, but they acknowledge in their note that "we could imagine the hiking cycle extending beyond this year if additional tightening proves necessary to keep growth on a below-potential path".