NEW YORK–The question for many forecasters in 2022 isn’t whether the Federal Reserve will raise interest rates this year, it’s how often. Now Goldman Sachs has issued an advisory to clients predicting the Fed will raise rates four times as it seeks to respond to high inflation and low unemployment.
The new forecast represents an increase from Goldman's previous call for three rate hikes in 2022. The Wall Street bank also now expects the Fed to begin shrinking the size of its $8.8 trillion balance sheet in July, compared with December previously, reported CNN Business.
"We continue to see hikes in March, June and September, and have now added a hike in December for a total of four in 2022," Goldman Sachs economists wrote in their note to clients.
The Goldman Sachs forecast comes at the same time the Fed itself has recently signaled it plans to raise rates three times in 2022.
Strong Job Market
To explain its call for four rate increases, CNN Business noted Goldman Sachs cited its forecast for inflation to still be running "far above" the Fed's target by the summer, as well as continued strength in the jobs market. The bank noted that although payroll growth in December missed expectations, that figure will likely get revised higher. Other indicators, including the 3.9% unemployment rate, point to strong demand for workers, added CNN Business.
The report further noted that Thomas Barkin, president of the Richmond Federal Reserve Bank, said on Jan. 7 it's "conceivable" the Fed raises interest rates in March.