Hike rates

Goldman Sachs predicts the Fed will hike rates 7 times in 2022

Goldman Sachs predicted the Federal Reserve will raise interest rates seven times this year, up from previous forecasts of five rate hikes in an effort to tame runaway inflation.

Goldman analysts, led by economist Jan Hatzius, issued the strengthened forecast in a report this week, just as recently released federal data indicated that inflation is continuing at a healthy pace.

January’s consumer price index posted a 7.5% annual increase, the largest since 1982, the Labor Department said Thursday.

The investment giant expects the Fed to raise its key interest rate from its current near-zero figure to 1.85% after central bank leaders last met this year in December .

The analysts wrote in their report that the Fed will issue gradual 25 basis point hikes in seven consecutive meetings.

In banking, one basis point, the smallest unit of measurement for interest rates, is equal to one hundredth of 1%.

Investors expect the Federal Reserve to act aggressively to bring the rapid rate of inflation under control.
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Analysts had previously forecast that the Fed would institute rate hikes of 50 basis points.

“Most Fed officials who commented opposed a 50 basis point hike in March,” Goldman analysts wrote in a note.

“So we think the more likely path is instead a longer run of 25 basis point hikes.”

St. Louis Fed President James Bullard said he supports raising interest rates by a full percentage point by July.

The last time the Fed raised interest rates by a substantial number was in 2000, when it announced a half-point hike.

Bullard said this week that he had become “significantly” more inclined to raise rates in order to calm inflation.

Americans are paying more for food and other expenses as the rate of inflation hits levels not seen in 40 years.
Americans are paying more for food and other expenses as the rate of inflation hits levels not seen in 40 years.
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Former US Treasury Secretary Lawrence Summers told Bloomberg last week that he expects the Fed to raise interest rates at the remaining seven meetings this year.

That sentiment was echoed by JPMorgan Chase CEO Jamie Dimon, who said he would be “surprised” if the Fed didn’t hike rates “six or seven” times.