Goldman's call, if it proves right, would extend the reset already underway in market pricing, where hike odds for September have fallen to around 30% and the next expected move has been pushed from December to January following softer July inflation data. Hatzius's argument rests less on a single data point than on a run of underwhelming releases, retail sales, payrolls, and inflation all missing, giving the bank confidence the FOMC's doves have no reason to shift toward hikes at the September 15-16 meeting. The flagged steepening in the Treasury curve is the more actionable signal for rates desks, with Goldman attributing it to a combination of cooling price pressures, fading hike expectations, and fiscal concerns rather than any single driver, while two-year yields holding above 4% suggests the market has not yet fully priced Goldman's more dovish view. A note carrying this much conviction from Goldman's chief economist typically moves positioning at the margin, particularly with FOMC minutes and further data due before the meeting. ---Earlier:Jackson Hole hype outruns Warsh playbook of saying as little as possible---Goldman's chief economist thinks the market is still pricing in too many rate hikes given how quickly the data has turned, and he expects the Treasury curve to reflect that shift as it plays out.Summary:Goldman Sachs chief economist Jan Hatzius called a September Fed rate increase very unlikely in a note published SundayHatzius cited sluggish retail sales, weak jobs numbers, and decelerating inflation as reasons to doubt the FOMC will act at its September 15-16 meetingHe said Goldman's baseline forecasts point to further improvement in inflation rather than renewed deterioration, and that market pricing for the funds rate remains too hawkishCME FedWatch data puts the odds of a 25 basis point hike to 3.75%-4% at around 30% heading into the September meeting, with market expectations for the next hike shifting from December to January after softer July inflation dataGoldman expects the Treasury yield curve to steepen, citing cooling inflation, fading rate hike expectations, and fiscal concerns, even as two-year yields remain above 4%Goldman Sachs has called a September Federal Reserve interest rate increase very unlikely, with chief economist Jan Hatzius arguing that market expectations for further hikes remain too aggressive given the trajectory of recent inflation data, according to Bloomberg (gated). Hatzius made the call in a note published Sunday, pointing to a run of underwhelming economic readings, including sluggish retail sales, weak jobs numbers, and decelerating price pressures, as grounds for scepticism that the Federal Open Market Committee will move at its September 15-16 meeting.Hatzius wrote that after two months of materially softer jobs and inflation data, it is difficult to see any of the committee's doves shifting toward supporting a hike. He said Goldman's baseline forecasts point to further improvement in inflation rather than a renewed deterioration as the year progresses, and reiterated the bank's view that market pricing for the funds rate remains too hawkish.Market pricing has already begun moving in that direction. CME FedWatch data, as cited by CoinDesk, puts the odds of a 25 basis point increase to the 3.75%-4% target range at around 30% heading into the September meeting, down after softer than expected July inflation data shifted sentiment last week. Traders have pushed back their expectation for the next 25 basis point hike to January, a notable retreat from the prior week, when a December move had been fully priced in.Goldman also flagged that the US Treasury yield curve is positioned to steepen, a move the bank attributes to a combination of cooling price pressures, diminishing rate hike expectations, and growing concern over the US fiscal outlook. Two-year Treasury yields, among the most sensitive to shifts in Fed policy, remain above 4%, suggesting the market has yet to fully reflect Goldman's more dovish rate view in shorter-dated instruments. This article was written by Eamonn Sheridan at investinglive.com.