Finance

Finance

Goldman Sachs predicts Fed will raise rates five times this year

29 January 2022 13:02 (UTC +04:00)

Goldman Sachs Group Inc.’s economists joined Wall Street peers in forecasting the Federal Reserve will raise interest rates more aggressively than they previously expected, APA-Economics reports citing Bloomberg.

Economists led by Jan Hatzius now predict the Fed will lift its near zero benchmark by 25 basis points five times this year rather than on four occasions. That would take the benchmark to 1.25%-1.5% by the end of the year.

Shifts are now seen by Goldman Sachs in March, May, July, September and December. They also expect officials to announce the start of a balance sheet reduction in June.

The switch came days after Fed Chair Jerome Powell said officials were ready to raise rates in March and left the door open to moving at every meeting if needed to curb the fastest inflation in 40 years. A government report on Friday showed the Employment Cost Index rose 4% in the year through December, the most in two decades.

“The evidence that wage growth is running above levels consistent with the Fed’s inflation target has strengthened, and we have revised up our inflation path,” the Goldman Sachs economists said in a report to clients. “In addition, Chair Powell’s comments earlier this week made it clear that the Fed leadership is open to a more aggressive pace of tightening.”