Goldman Sachs Expects Three More US Fed Interest Rate Hikes This Year: Report

Goldman Sachs Expects Three More US Fed Interest Rate Hikes This Year: Report

US Federal Reserve is expected to raise interest rates three more times this year by a 25bp (basis points) each, according to Goldman Sachs, reported Reuters. This after data showed persistent inflation and resilience in the labour market, the report said. 

“In light of the stronger growth and firmer inflation news, we are adding a 25bp (basis points) rate hike in June to our Fed forecast, for a peak funds rate of 5.25-5.5 per cent,” economists led by Jan Hatzius said on Thursday. 

According to data released on Thursday, producer prices increased in January by the largest margin in seven months, while a Labor Department report revealed that the number of Individuals submitting new applications for jobless benefits surprisingly decreased last week, the report said. 

After the recent US data, the European investment bank UBS said it anticipated the US Fed to hike rates by 25 basis points at its meetings in March and May, potentially leaving the fed funds rate in the range of 5-5.25 per cent.

“After that, we expect the FOMC (Federal Open Market Committee) to turn around and begin to cut interest rates at the September FOMC meeting,” UBS wrote according to Reuters. 

J.P.Morgan had forecast the terminal rate at 5.1 per cent by the end of June, while Band of America (BOfA) Global Research had forecast it in the range of 5-5.25 per cent by the end of the year, the report said. BofA had also predicted two rate hikes of 25 bps each earlier.

Before the release of the most recent data, the majority of economists surveyed by Reuters predicted that the Fed would raise interest rates at least twice more in the upcoming months, with the possibility that they would rise even further. However, none of them predicted that rates would be cut this year.

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