Goldman Sachs is taking a stance that sharply diverges from mainstream market expectations, asserting the US Federal Reserve will maintain interest rates unchanged for the foreseeable future and predicting inflation pressures will gradually ease by the second half of 2026.

Matheus Dibo, Goldman Sachs' Head of Investment Strategy for Europe, Middle East, and Africa, stated on Bloomberg Television Wednesday that while markets are currently pricing in rate hikes, Goldman Sachs holds a different view, believing the Fed will remain on hold throughout 2026. He noted that early-year inflation data was driven by one-off factors such as oil prices, the World Cup, and tariffs, with very limited signs of inflation spreading to broader sectors.

This assessment stands in stark contrast to current market pricing. Traders are now placing roughly a 50% probability on a 25-basis-point rate hike in September, while economists forecast that following a surprise 0.4% decline in the previous core CPI, the upcoming data will show a month-over-month increase of 0.1%. Dibo acknowledged the existence of upside risks but maintained his baseline view that the Fed will not act.

The Fed Can Afford to Wait and See, No Need to Act Precipitously

Dibo elaborated on the logic behind the view that inflation is on a moderating trend from multiple angles. He stated that housing inflation should slow down in line with real estate market trends. On the wage front, he argued wages will not become a major source of inflation, as the US labor market is far from overheating.

The US jobs report released last week is still being digested by the market. Dibo described the current labor market as being in a state of "equilibrium" 鈥?featuring neither mass hiring nor mass layoffs, and overall in a state of stagnant balance. In his view, this dynamic does not create a driver for rising inflation.

Dibo indicated that the Fed is fully capable of waiting for more data before making a decision, with no need to act prematurely. In his view, the current economic environment provides ample room for the central bank to observe monetary policy.

However, he also acknowledged that the risks are not symmetric. "We fully acknowledge that the risks are tilted toward a rate hike, especially if upcoming inflation data comes in higher than expected for several periods," he said. This implies Goldman Sachs' "hold steady" forecast rests on the premise that inflation does not surprise further to the upside.

Market and Goldman Sachs Diverge, CPI Data Becomes Key Variable

Current market pricing shows traders expect roughly a 50% chance of a rate hike in September, directly contradicting Goldman Sachs' baseline view.

The upcoming US CPI report for July will serve as a crucial juncture for testing both sides' judgments.

Economists forecast a core CPI month-over-month increase of 0.1%, a significant narrowing from the previous month's surprise decline of 0.4%. If the data comes in above expectations again, market rate hike bets could strengthen further, challenging Goldman Sachs' view. Conversely, if inflation continues to be moderate, it would provide support for the investment bank's forecast of no action by the Fed.