Goldman Sachs has incorporated a 25-basis-point rate increase at the September FOMC meeting into its base-case scenario, according to a research note released by the investment bank.

The firm noted that while the August Consumer Price Index reading had limited impact on its inflation outlook, it pushed market expectations for a rate hike to near 90%, creating conditions that make it likely the Federal Reserve will raise rates to avoid triggering a sharp market reaction.

However, Goldman Sachs believes there is currently insufficient economic justification for an upward adjustment to rates. All inflation exceeding the 2% target can be attributed to one-off factors expected to fade, with core PCE inflation having already shown early signs of moderation by slowing to approximately 2.5% over the past three months.

The bank projects the Fed's statement will include only the minimal necessary revisions, potentially referencing the rate hike as a measure to guide inflation back toward its 2% goal, while deliberately withholding any forward guidance regarding the future rate path or conditions for additional increases.

Regarding the rate trajectory extending into 2027, Goldman Sachs maintains its projection of two rate cuts but has shifted the timing from June and December to September and December. The firm has also revised its terminal rate forecast upward from 3%-3.25% to 3.25%-3.5%.