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September Fed interest-rate increase is 'very unlikely,' Goldman Sachs says
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Goldman Sachs has thrown cold water on expectations for a September interest-rate increase from the Federal Reserve, a development that could provide a major tailwind for bitcoin and other risk assets. The investment bank described the likelihood of a rate hike next month as "very unlikely," citing a string of soft economic data suggesting inflation will continue to moderate. Bitcoin was trading around $63,500, up about 1% on the day, as the news broke.
The cryptocurrency has remained firmly locked within the $62,000β$66,000 range for over a month, with traders awaiting clearer signals on monetary policy. Goldman's chief economist, Jan Hatzius, told clients that retail sales, employment figures, and slowing inflation all point to a more dovish stance from the Federal Reserve. The bank's assessment comes just weeks after the Fed raised its benchmark rate to the 3.5%β3.75% range, but weaker-than-expected data have shifted the debate.
Hatzius wrote in a note Sunday that "under our baseline economic forecasts, the inflation news is more likely to improve further than to deteriorate anew as the year progresses." He also argued that market pricing for the funds rate remains "too hawkish," suggesting investors are overestimating the pace of tightening. The note, reported by Bloomberg, highlights a growing divide between the Fed's projections and what the actual economic data show.
Interest rates directly influence the availability of credit and fiat liquidity in the broader economy, which in turn drives demand for risk-on assets like bitcoin. Rate increases are traditionally bearish for cryptocurrencies, a dynamic clearly visible during the aggressive Fed tightening that triggered the 2022 market slide. Conversely, rate cuts tend to be bullish, echoing the crypto rally that followed the March 2020 Covid crash when the Fed slashed rates to near zero.
For bitcoin bulls, a September pause would represent a significant shift in momentum. At the time of writing, traders are pricing in just a 30.6% chance that the Fed will raise rates by 25 basis points to the 3.75%β4% range, according to CME FedWatch data. The odds dropped sharply after last week's July inflation report showed price increases slowing as expected, reinforcing the case for the central bank to hold steady.
The reaction from the crypto market has been cautiously optimistic, with bitcoin hovering near the upper end of its recent range. Analysts note that a dovish Fed could provide the catalyst needed for a breakout above $66,000, a level that has resisted multiple attempts. However, some caution that inflation remains sticky and the Fed could still surprise, especially if oil prices or other external factors spike.
Looking ahead, Goldman Sachs expects the Fed to remain on hold for the rest of the year, with potential rate cuts possible in 2024 if inflation continues to ease. This aligns with a broader trend of central banks pausing their tightening cycles as global growth concerns mount. For the crypto market, a sustained period of stable or falling rates would likely support higher valuations, though regulatory and adoption concerns remain.
The broader context is that bitcoin and other digital assets have become increasingly correlated with macroeconomic conditions, particularly Federal Reserve policy. The 2022 bear market was largely driven by the fastest rate hiking cycle in decades, and any signal of a pivot has historically triggered immediate rallies. With the next Fed meeting scheduled for September 20-21, the coming weeks will be crucial for determining whether bitcoin can finally break out of its range or face another period of consolidation.
