Goldman Sachs: This week's Fed decision is "exceptionally uncertain," with a low probability of a rate hike

1. Goldman Sachs analysts stated that the outcome of this week’s Federal Reserve monetary policy meeting is “exceptionally uncertain,” but most voting officials seem unlikely to push for a rate hike at the conclusion of Wednesday’s meeting. The analyst team, including David Mericle, pointed out that the weaker June inflation data should weaken the case for an immediate rate increase, and historically, the Federal Reserve has also tended to avoid a “sudden hike.”2. Current market pricing shows that the probability of a Federal Reserve rate hike this week is about 37.9%, while the probability of keeping rates unchanged in the 3.5% to 3.75% range is around 64%. This bet comes as investors are assessing the impact of ongoing tensions in the Middle East on oil prices—after the US and Iran paused hostilities on Monday, Brent crude prices sharply retreated to below $90 per barrel, having previously approached $100 the prior week amid fears of escalating conflict.3. The surge in oil prices has triggered concerns in various countries about a sudden rise in inflation, which could prompt central banks to raise rates. However, Goldman Sachs analysts expect that the Federal Reserve policy statement will acknowledge the inflationary risks posed by geopolitical conflicts, “and at least one member may cast a dissenting vote supporting a rate hike.” They also note that although recent geopolitical news has “deteriorated,” inflation data has improved, and the core PCE data for June, to be released this week, is expected to show “a weaker trend.”