VIEW: Goldman Sachs Reiterate Baseline View, Wary Of Hawkish Risks

Goldman Sachs write “ECB commentary at Jackson Hole was hawkish despite weakening growth.”

• “We still believe that a 50bp hike is more likely in September given the incoming recession, lingering sovereign concerns and the expected slowdown in Fed hiking. But the hawkish commentary suggests that a 75bp move is possible, especially if the flash August inflation data surprises notably on the upside.”
• “Our baseline remains that the Governing Council will slow the hiking pace to 25bp steps from October for a terminal rate of 1.50%, but see a low hurdle for further 50bp hikes in Q4 if growth holds up better and second-round inflation effects continue to build, as embedded in our upside scenario for the ECB path.”