Goldman Sachs has pushed back its forecast for the Federal Reserve's next interest rate hike to December, as the latest inflation data came in below expectations, weakening the case for another rate increase in October. The investment bank had previously predicted a 25 basis point hike in October.

In a report released on Wednesday, Goldman Sachs said: "We have pushed back the second hike in our forecast to December, and believe there is a strong possibility that the Federal Open Market Committee (FOMC) ultimately concludes that no further rate increases are needed."

The Fed raised rates in September, its first hike in three years and the first policy move by new Chair Kevin Warsh aimed at addressing inflation.

Data released on Wednesday showed that U.S. inflation rose less than expected in August. The Personal Consumption Expenditures (PCE) price index climbed 3.4% year-over-year in August, below the 3.7% expected by economists surveyed by Reuters.

On Tuesday, New York Fed President John Williams said the Fed has time to weigh the data before deciding when to raise rates again.

According to the CME Group's FedWatch Tool, interest rate futures currently reflect roughly a 38% probability of a 25 basis point hike in October, compared with about 51% on the previous trading day and nearly 71% a week ago.

Market participants are closely watching the U.S. September nonfarm payrolls report scheduled for release on Friday, which is seen as critically important.