Goldman Sachs has concluded that the aggressive rhetoric from Kevin Warsh will not be matched by actual inflation data, keeping its core prediction that the Federal Reserve will hold rates steady.

Jan Hatzius, the bank's chief economist, noted that while Warsh's speech at Jackson Hole was his most hawkish public appearance since assuming the Fed chairmanship, a shift in tone alone is unlikely to trigger a rate hike next month. In a note to clients, Hatzius highlighted that Warsh has made clear his primary focus is ensuring underlying inflation visibly and swiftly moves back toward the Fed's 2% target, while cautioning that further action would be necessary if that goal is not met.

According to Hatzius, Warsh directly addressed the recent string of encouraging inflation reports, acknowledging that this summer's PCE and CPI readings exceeded expectations while arguing they do not yet demonstrate a substantial improvement in the underlying price trend. This framing technically leaves the door open for a September hike, but only if the upcoming August CPI and PPI reports surprise to the upside.

Goldman Sachs' own forecasts suggest that threshold will not be crossed. Hatzius stated the bank continues to project August core CPI and core PCE inflation will land around 0.2%, a pace his team believes is insufficient to justify the policy response implied by Warsh's language. On that basis, the firm's baseline view remains that the Federal Open Market Committee will hold rates unchanged at its September meeting.

If Hatzius's projections for roughly 0.2% growth in both core CPI and PCE prove accurate, that would broadly align with recent trend inflation rather than the acceleration Warsh signaled he needs to see. Such an outcome could disappoint traders who pushed rate-hike odds to nearly 60% following the speech alone.

The report comes as markets reassess September probabilities in the wake of Warsh's remarks, with interest rate futures showing a significant jump in implied odds of a hike after his Jackson Hole address. Goldman's analysis suggests that repricing may prove premature unless inflation data itself strengthens notably in the coming weeks, making the August CPI and PPI releases more decisive for the September decision than any single speech.