Investment bank Goldman Sachs has adjusted its forecast for the Federal Reserve's monetary policy path, now anticipating an additional 25-basis-point rate increase in October. This revision comes after the Federal Open Market Committee (FOMC) delivered a widely expected hike, raising the federal funds rate by 25 basis points to a target range of 3.75%-4%.

The firm notes that while the rate move itself was in line with market consensus, the tone of the meeting proved more hawkish than its own projections had assumed. Consequently, Goldman Sachs has updated its base case, now expecting the FOMC to implement another quarter-point hike at its October meeting, a shift from its prior assumption that September would mark the final increase of this cycle.

According to the bank, a consecutive rate hike represents the most natural policy choice, as it aligns with the FOMC's stated goal of returning to its 2% inflation target "in a more timely manner." However, Goldman Sachs does not view a further move beyond that as part of its baseline scenario. One key reason for this stance is that its own forecasts for core personal consumption expenditures (PCE) inflation remain below the median projections of FOMC members. The firm currently projects core PCE inflation at 3.2% for the fourth quarter of this year and 2.2% for the same period next year, compared to the FOMC's median estimates of 3.4% and 2.5%, respectively.

Goldman Sachs has maintained its forecast for the terminal federal funds rate at 3.25%-3.5%, a projection that incorporates anticipated rate cuts of 25 basis points each in September and December 2027, as well as March 2028.