Goldman Sachs’ current activity indicator as of October rose by 0.1 percentage points from September, and its third-quarter GDP forecast calls for annualized quarter-on-quarter growth of 3.3%; meanwhile, the economic surprise index fell and financial conditions tightened slightly.
Goldman Sachs believes tariffs, the energy shock and mismeasurement of AI prices together explain the current core inflation overshoot. Its baseline calls for two rate hikes, followed by cuts to 3.25%–3.5%.
Goldman Sachs expects the Federal Reserve and the European Central Bank to pause rate hikes this week and raise rates again in December. US household demand for equities will remain robust in 2027, but depends on employment, wealth, and competition from cash and bond yields.
Goldman Sachs expects the Federal Reserve to raise rates at every other meeting, completing the second and final hike of this cycle in December. Markets still price in roughly four hikes in total; the disagreement centers on whether tariff, energy and AI-related price pressures can ease in 2027.
Citi interprets falling stock prices, widening credit spreads and declining Treasury yields as signs that markets are assigning a higher probability to a slowdown in AI spending. The bank still expects a rate hike in December, but the buffers provided by consumption and housing are weakening, and further stock market declines could change the policy direction.
Nomura expects the Fed to hold rates steady in October and raise them by another 25 basis points in December. A rebound in inflation still supports tightening, but downward revisions to historical data, credit pressures and housing weakness reduce the urgency to act immediately; third-quarter growth is supported by consumption and business investment.
