Goldman Sachs Brings Forward U.S. Rate Hike Projection by a Year

“The main reason for the change in our liftoff call is that we now expect core PCE inflation to remain above 3% — and core CPI inflation above 4% — when the taper concludes,” Goldman’s chief economist, Jan Hatzius, wrote in a client note.

Federal Reserve policymakers are expected to announce plans to start tapering the central bank’s $120 billion in monthly purchases of Treasuries and mortgage-backed securities at the end of their two-day policy meeting on Wednesday.

“Large surprises on the virus, inflation, wage growth, or inflation expectations, could prompt a revision, but we think the hurdle for a change in either direction is high,” said Hatzius.

Goldman Sachs also expects a second interest rate hike in November 2022 and two rate increases each year after that.

In the wake of Friday’s inflation data, fed fund futures fully priced in a quarter-point tightening by July 2022 and another rate increase by December.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu)