Goldman Sachs is betting that Federal Reserve Chairman Kevin Warsh's hawkish rhetoric will not be matched by hawkish data, keeping a Fed hold as its base case for the September meeting.

Goldman Sachs chief economist Jan Hatzius, whose team's rate calls are closely watched by markets, described Warsh's address at the Jackson Hole Economic Symposium — the Kansas City Fed's annual gathering in Wyoming that has historically served as a venue for signalling policy shifts — as his most hawkish appearance yet as Fed chairman, but argued the shift in tone is unlikely to be enough on its own to produce a rate hike next month.

In a note to clients, Hatzius said Warsh had made clear his predominant concern is ensuring underlying inflation moves back toward the Fed's 2 percent target clearly and at sufficient speed, warning there is more work to do if it does not. According to Hatzius, Warsh also addressed the recent run of encouraging inflation data directly, acknowledging that this summer's PCE and CPI readings had come in better than expected while arguing they do not yet indicate a meaningful improvement in underlying price trends.

That framing, Hatzius wrote, leaves the door open to a September hike, but only if the upcoming August CPI and PPI reports surprise to the upside. Those releases are among the last major inflation datapoints scheduled before the Fed's late-September meeting, when the FOMC's own August PCE inflation gauge will not yet be available, leaving CPI and PPI as the primary readings policymakers and markets can react to.

Goldman's own forecast suggests that bar will not be cleared. Hatzius said the bank continues to expect core CPI and core PCE inflation to print around 0.2 percent for August, a pace the firm views as insufficiently firm to justify the kind of policy response Warsh's remarks implied. On that basis, Goldman's base case remains that the Federal Open Market Committee will leave rates on hold at its September meeting.

The note lands just as markets have been recalibrating the odds of a September move following Warsh's speech, with interest rate futures showing a jump in the implied probability of a hike after his Jackson Hole remarks. Goldman's read pushes back against the sharpest market reaction, arguing the bar for a September hike is higher than the initial spike in rate-hike odds implied.

If Hatzius is right that core CPI and PCE will print around 0.2 percent for August, that would be broadly consistent with recent trend inflation rather than the acceleration Warsh signalled he needs to see, likely disappointing traders who had pushed hike odds toward 60 percent on the speech alone.

A soft outcome on the upcoming CPI and PPI releases would probably see the front end of the Treasury curve retrace some of Friday's rise and could take pressure off equities that fell on rate concerns. Conversely, any upside surprise in the inflation data would validate Warsh's framing and increase the odds markets have already begun pricing, making the next two data points unusually consequential for the September decision.

Goldman's analysis suggests the repricing may prove premature unless the inflation data itself turns markedly firmer over the coming weeks, making the August CPI and PPI releases a more decisive input to the September decision than Warsh's rhetoric alone.

Earlier: New week, catch up time! Warsh's hawkish Jackson Hole remarks lift rate hike odds, pressure stocks