Goldman Sachs: The market's bets on the Federal Reserve's interest rate hikes are overly hawkish.

Goldman Sachs stated that, given the declining inflation in the worlds largest economy, market expectations for the Federal Reserve to raise interest rates remain overly aggressive. The bank's chief economist, Jan Hatzius, wrote in a client research report that due to factors such as weak retail sales data, disappointing employment figures, and easing inflation, the likelihood of an interest rate hike at the Fed's September meeting has become "very low." In the report released on Sunday, Hatzius stated, "According to our baseline economic forecast, the probability of further improvement in inflation data over time is higher than that of a deterioration. We still believe the market is pricing in the federal funds rate too hawkishly." Data shows that traders have pushed back expectations for the Fed's next 25 basis point interest rate hike to January, whereas just a week ago, the market had fully priced in a hike in December. Goldman Sachs noted that while the hawkish leanings in market pricing have weakened, there is still room for expectations to adjust.