Goldman Cuts September Rate Hike Odds To 40%, Just Days After Raising Them To 55%

Tyler Durden's picture

Shortly after the latest deteriorating ISM data was released yesterday, which showed that the US services sector was rapidly following US manufacturing into contraction, we had one question: how long until Goldman flip-flops again, and changes its surprising call from last Friday which bucked the Wall Street trend and boosted September rate hike odds from 40% to 55%, which in turn almost singlehandedly catalyzed a kneejerk reaction in Fed Fund futures on Friday, sending them virtually unchanged on the day of Friday's disappointing jobs report.

 

We didn't have long to wait: overnight Hatzius did just that, when he said that "we are lowering our subjective odds of a rate increase at the September FOMC meeting from 55% to 40%." At the same time, Goldman is "nudging up the odds of a rate increase at the December meeting to 30% from 25%, but taking the cumulative odds for at least one hike this year down to 70% from 80%. With slightly softer data and less “time on the clock”, a rate increase this year now looks a bit less certain, in our view."

Which also means Gartman 1 - Goldman 0, as Goldman - at least as of this moment - is the undisputed "fade" champion.

From Goldman's Jan Hatzius:

BOTTOM LINE: San Francisco Fed President John Williams advocated for raising rates “sooner rather than later”, but offered no new clues on whether the committee will be ready to act on this month. His speech followed today’s non-manufacturing ISM index, which dropped sharply to 51.4 from 55.5 previously. As a result of the ISM miss and lack of clear signal from Fed officials, we are taking down our odds of a hike at the September 20-21 FOMC meeting to 40% (from 55%).

MAIN POINTS:

  1. In remarks this evening, San Francisco Fed President Williams advocated for raising rates “sooner rather than later”, but did not stress the need to hike at the September FOMC meeting specifically. The lack of explicit guidance from President Williams tonight—or from other Fed officials in recent days—suggests FOMC participants are not especially concerned about the low odds of a hike discounted by markets (about 20% by our estimates). Before past rate increases, the minimum amount discounted by markets 15 days prior to the decision was about 70% (excepting February 1994), and we had expected communication from key officials after the August employment report if indeed they planned to raise rates this month.
  2. In addition, earlier today the ISM reported that its non-manufacturing index declined sharply to 51.4 from 55.5 previously. While this is just one indicator, the surprise was meaningful, and there may have been some Fed officials feeling lukewarm on a September hike to begin with. In these circumstances, one large surprise could carry a lot of weight.
  3. As a result, we are lowering our subjective odds of a rate increase at the September FOMC meeting from 55% to 40%. We are nudging up the odds of a rate increase at the December meeting to 30% from 25%, but taking the cumulative odds for at least one hike this year down to 70% from 80%. With slightly softer data and less “time on the clock”, a rate increase this year now looks a bit less certain, in our view.

And with Goldman's capitulation, it means that the hawkish exuberance of the Jackson Hole meeting is now completely gone.

Perhaps less surprising, is that the dollar is up on the news.

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bobert727's picture

They must have listened to Gartman

SubjectivObject's picture

What was Goldman doing [just] before they issued their contradictory statements?

JRobby's picture

The data is all over the map. That usually means one thing, chaos!!

Thankfully, we have a trusted and proven source like Goldman to interpret it all.......

nibiru's picture

... and Gartman - this guy never fails to deliver (to anyone but his subscribers)

Manthong's picture

Goldman Sucks

Hopeless for Change's picture

Falsely "raise expectations" to catch dumb money in your false move and fade it, then come out with the real prediction.  

 

Criminal, plain and simple.  A smaller firm would be raided by the FBI and their employees sent to prison.

CJgipper's picture

I can tell you what Goldman was doing in the interim

"Draw them in.  Let them come.  Let them come.  Let them come...." - 13 Hours

JustPastPeacefield's picture

Do these people have any self-awareness? Do they know what utter clowns they are? You have doctors, engineers, programmers ... and these clowns in expensive suits. Thieves really. Nothing more. Self-satisfied thieves. Jail them.

NoWayJose's picture

Or just ignore them...

Or just wait a day for their 'effect' - then do the opposite of their recommendation (like they do!)

ejmoosa's picture

 

They all deep down want negative rates.  Anyone that borrows money wants negative rates.  This is what happens when the borrowers have been allowed to amass more power than the investors.

Negative rates will allow the US debt bomb to tick for just a fewy days or months longer...but it does allow it to continue.

 

 

venturen's picture

investors? Borrowers have amassed more power than "SAVERS". There few investors...there are wall street scam artists pumping and dumping. We are in a riskless market guaranteed by people with a money printing press...willing to do whatever it takes to shower the richest with MOAR!

 

Investors...that is funny.

DavidC's picture

They're now doing what the Fed has been doing.

"We're going to raise rates, wait, we're going to lower them, wait we're going to raise them, wait..."

"We se rate hike odds of 55%, wait, we see rate hike rate odds of 40%, wait..."

And the bizarre thing is, with all eyes looking at the Fed and "Will they, won't they", all eyes are OFF what's happening fundamentally, which is BAD figures! Last week's NFP anyone?! Yesterday's ISM anyone?!

DavidC

CJgipper's picture

After a decade of being horribly wrong, I've concluded that fundamentals are completely irrelevant, until they're not.  They're going for broke.  This charade will simply continue until they break the dollar, the government, or both.

RiverRoad's picture

Goldman oughtta know what the Fed's gonna do:  They run the damn thing.  Yellen's their stooge; same as Hillary.

wobblie's picture

Ho hum. The easily stopped stupidity goes on. We could easily end this "recession", interest rates are a distraction. The game is economic austerity, ie, suck up as much wealth from the real economy for the ruling class and its minions.

https://therulingclassobserver.com/2016/09/04/paradise-suppressed/

swmnguy's picture

It's like stealing the silver service while the stern of the Titanic rises.

SomethingSomethingDarkSide's picture

FOMC Members are Jaw Boning in order to keep the price of gold down, and to stop stocks from going parabolic.

The data will be horrific, we know this, which will fuel more QE hopes.

The pattern then becomes simple:

1) Bad Economy, people expect QE and buy stocks, gold and bonds

2) Jaw Boning that "rate hike is alive", people sell said assets

3) Terrible data arrives, hike off table, risk on again

Rinse and Repeat until satisfied.

DogeCoin's picture

LOL. Fuck you Goldman Sachs.

conraddobler's picture

Translation.

We're nearing diminishing marginal returns on how much we can fleece our own clients for the time period they trust us is approaching zero so fast we'll be adjusting our calls to micro seconds of duration.

We should be able to make it up on volume of the one patsy left.

Last of the Middle Class's picture

A dirty job but someones got to do it right, GS? Sucking the life out of an economy for profit.

MFL8240's picture

The Jewish sewer sytem lied to set up a trade.  Blankfien and his crew have no idea how most people in this country loath this tribe!

Zandig Slaytanic's picture

Who cares what Goldman has to say. Frauds.

Davidduke2000's picture

How about zero % or even minus 2 %

tlnzz's picture

The chance of a rate hike before the election is zero. ZERO has decreed it.

swmnguy's picture

The FED knows raising rates will collapse the Ponzi.  Private debt is the concern, not public.  Private parties can't print their own money.  It's taken 7 years of ZIRP, plus some $12 Trillion pumped through Wall Street like plasma through a cadaver just to keep the Ponzi alive this long.  Even 0.25% is at the maximum of what the TBTF's can afford to pay, they way they've looted themselves and the overall economy.

Yes, soon enough we, the taxpayers, will be paying the TBTF's to take the money they loot.  Meanwhile, our personal credit cards will draw some 15-25% interest.  I have a credit rating around 825 on average (depends on which of the innumberable FICO-type scores I consult), and most of my credit cards are at 14.9% or so.  My credit union gave me one at 7.9%.  I keep a Capital One card for giggles, that has a $1,000 credit limit and a 24.99% APR and they have refused to improve it for 15 years despite my never having carried a balance or paid late, much less missed a payment.  It's hilarious really.

If the FED ever does raise rates in any meaningful way, to reflect the true cost of money, we'll know the whole enchilada is about to collapse and the cronies have all grabbed their bugout bags and hunkered down behind their private armies.

sudzee's picture

I'll be watching the B of Can rate decision with much interest. I expect a dovish tone to no change at .25% setting the stage for negative rates in early 17. No level of gov is able to service their debt at current rates. Canada cannot survive without a move lower in its currency. The future has finally caught down to the building debt bomb. 

Neochrome's picture

When it comes to Hillary, politics will always supersede justice in the country. (see FBI note)

When it comes to Hillary, politics will always supersede economic well being of the country.  (see FED note)

When it comes to Hillary, politics will always supersede truth in the country. (see MSM note)

MASTER OF UNIVERSE's picture

Goldman Sachs has no clue what they are doing which probably explains why they state they are doing 'God's work' when we all know they are just masturbating 24/7/365.

headfake's picture

now that everyone is more or less in agreement they wont raise rates....watch em do it lol

brushhog's picture

I have not changed my odds for a sept rate hike.....0%. There is absolutely no chance of a hike before the elections.

silverer's picture

So nobody knows what's going on. Figures.

venturen's picture

The Kabuki theater show always ends the same! 

BendGuyhere's picture

Notice how everything turned to a sour puddle of shit when the jews took over Wall Street. This is because the New York hebrews, exemplified by GSAX, are stupid-greedy. No honor. No integrity. Nothing but the love of money. The WASps and germans just have to sit back and watch these bastards go down in oily flames.

Bobbyrib's picture

When you are a Goldman Sach client and you receive your statement, do it actually have your name on it, or your assigned muppet name? Like does it say John Smith or Mr. Dumbfuckerupopus.

 

JailBanksters's picture

ROFL, They think, well they want the people to think the Private Banking Cartel has a choice.

Is this Change you can believe in ?

 

Steeley's picture

You're only a leader if someone is following you..

DrSyn's picture

Goldman must be on the payroll.  They now have earned the same level of credibility that George Soros has...none.  My advice: listen to what they recommend, then do the opposite; that way you'll be doing with your money exactly what they are doing with theirs. 

juno721's picture

What about the phrase "data dependent" doesn't Goldman understand?  Bank economists are notoriously on

the side of the bank, not the side of the economics.  Banks want to increase NIM (net interest margin) without

regard for the economic impact of a rate hike(s); their self-interest should be evident to anyone that follows

these things.  GS was my prime broker at a hedge fund and they were squirely as hell filling floor orders plus

their REDI system, as they've admitted, was a great way to front run hedges.  These guys are criminals and

the best fade going.  

juno721's picture

What about the phrase "data dependent" doesn't Goldman understand?  Bank economists are notoriously on

the side of the bank, not the side of the economics.  Banks want to increase NIM (net interest margin) without

regard for the economic impact of a rate hike(s); their self-interest should be evident to anyone that follows

these things.  GS was my prime broker at a hedge fund and they were squirely as hell filling floor orders plus

their REDI system, as they've admitted, was a great way to front run hedges.  These guys are criminals and

the best fade going.  

juno721's picture

What about the phrase "data dependent" doesn't Goldman understand?  Bank economists are notoriously on

the side of the bank, not the side of the economics.  Banks want to increase NIM (net interest margin) without

regard for the economic impact of a rate hike(s); their self-interest should be evident to anyone that follows

these things.  GS was my prime broker at a hedge fund and they were squirely as hell filling floor orders plus

their REDI system, as they've admitted, was a great way to front run hedges.  These guys are criminals and

the best fade going.