Goldman Sachs sees October Fed hike after hawkish signal

Traders see roughly 50% odds of another quarter-point Fed rate hike in October, according to CME Group's FedWatch tool, up sharply after policymakers signalled further tightening could be needed.

Goldman's revised forecast leaves Bank of America Global Research as the only other major brokerage expecting a more aggressive tightening path, with BofA projecting rate hikes in October and December.

Markets will also be watching policy decisions from the Bank of England, due later in the day, and the Bank of Japan on Friday for further clues on the global interest-rate outlook.

SYDNEY, Sept 17 (Reuters) - Goldman Sachs now expects the Federal Reserve to raise interest rates by another quarter point in October, making it one of the first major Wall Street banks to forecast consecutive rate hikes following the U.S. central bank's hawkish signal on Wednesday.

The call represents a reversal of Goldman's earlier view that the U.S. Fed had completed its tightening cycle after September's quarter-point increase.

Goldman said the Fed's updated rate projections, which showed a strong majority of policymakers expecting at least one more increase this year, pointed to a "two-hike baseline" for 2026.

The brokerage said October was the most likely timing for the next move because policymakers framed further tightening as supporting "a timelier return" to the Fed's 2% inflation target.

The Fed earlier on Wednesday raised interest rates by 25 basis points to a 3.75%-4.00% range.

Goldman said the meeting was more hawkish than expected, citing policymakers' rate projections, an upward revision to the neutral interest rate and Chair Kevin Warsh's repeated description of the move as having only "removed a dose of accommodation."