🚨The last bank on Wall Street that held its ground has also turned, and a consensus has been fully reached—

Goldman Sachs expects the Federal Reserve to raise interest rates by 25 basis points in September, changing its previous prediction of no change.

The market currently gives a probability of about 86% for a 25bp rate hike in September and has even started trading for further rate hikes in December.

In September 2024, the Federal Reserve began its rate-cutting cycle when CPI was far above 3%.

Two years later, despite CPI dropping to its lowest point in five years at 2.4%, the market still widely expects the Federal Reserve to have no choice but to initiate a rate hike cycle next week.

The Federal Reserve is having a tough time—

After the last round of rate cuts ended, the Federal Reserve found that the U.S. economy did not complete a soft landing as traditionally scripted, but instead formed an economic structure that is more prone to persistent inflation under high fiscal deficits, trade protection, and geopolitical energy shocks.

Several inflationary pressures currently emerging are difficult for the Federal Reserve to truly control:

1⃣ Energy, with Middle Eastern supply and transportation risks behind it, rising prices will continue to permeate core inflation through gasoline, aviation, transportation, chemicals, manufacturing, and food costs.

2⃣ Tariffs, similar to oil prices, are fundamentally a tax increase on the supply side. After enterprises face increased import costs, they will either compress profits or raise prices, ultimately, someone has to bear the cost.

There is no room left; the existing inflation investment logic may have already failed!

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