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After flip-flop, this is what Goldman now thinks about a September rate hike

Goldman Sachs economists sliced the odds again for a September rate hike, now to 25 percent, less than half of what they expected when Fed officials met at Jackson Hole, Wyoming, in late August.

The economists basically blame a foggy message.

"The lack of a signal is meaningful because if action were likely, the committee would normally make an effort to nudge the market toward anticipating a hike," they wrote in a note.

They said there are eight Fed officials who would like to raise rates this month, four of them voters. Another four would prefer to wait, two of those voters. But five central bank officials have been harder to read and where they stand is unclear.

The economists had put 55 percent odds on a September hike after comments from Fed Chair Janet Yellen and Vice Chair Stanley Fischer at Jackson Hole, when both indicated the Fed could raise rates soon.

Within a few days, the economists slashed that forecast to 40 percent from 55 percent, based in part of the lack of clarity from San Francisco Fed President John Williams on the timing of a hike.

They now place odds of a December rate increase at 40 percent, up from 30 percent, with the odds of a hike this year at 65 percent.

Goldman had viewed the disappointing August nonfarm payrolls on Sept. 2 as a close call, but just strong enough for the Fed to raise rates — until the August ISM nonmanufacturing data fell sharply to 51.4, a level last seen in 2010.

The firm's call for a September hike was contrarian with most economists believing the weakish jobs report for August ruled out a rate rise this month.

Photographer | Collection | Getty Images

That jobs report left many economists confident in their forecasts that the Fed would hike rates in December rather than September. The disappointing 151,000 nonfarm payrolls for August was about 30,000 below expectations and not seen as strong enough to force the Fed's hand.

But now, "the lack of a coordinated signal from Fed leadership in recent days suggests this is no longer the case — or was never the case to begin with — and that Chair Yellen herself favors standing pat," the Goldman economists wrote.

The market was shaken last week after comments from Boston Fed President Eric Rosengren, who suggested the the central bank could hike. But two Fed governors — Daniel Tarullo and Lael Brainard indicated the Fed could wait.