Economists at Goldman Sachs see a risk that the Federal Reserve (Fed) will tighten monetary policy at its meetings beginning in March, a more aggressive approach than the financial group currently expects.
The company’s analysts, led by Jan Hatzius, said in a weekend briefing to clients that they currently expect Fed rate hikes in March, June, September and December, and for the central bank to announce the start of reducing its balance in July. .
They stated that inflationary pressures mean “risks tilt slightly to the upside from our baseline,” and there is a chance that Fed officials will act “at every meeting until the inflation picture changes.”
This raises the possibility of another increase or an early announcement of the balance in May, and more than four increases this year. We can imagine a number of potential catalysts for a shift to rate hikes in back-to-back meetings.”
Federal Reserve Chairman Jerome Powell and his colleagues met this week amid expectations that they will signal a willingness to raise interest rates from near zero in March.
Among the possible catalysts for tighter monetary policy is another rise in long-term inflation expectations, or another inflation surprise, Goldman Sachs economists said.
They indicated that they were already concerned about inflation expectations due to the effect of the omicron variable and continued strength in wage growth.
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