Goldman Sachs: Fed rates peaking at 5% in March – Bloomberg

Anil Panchal FXStreet

“Goldman Sachs economists said the US Federal Reserve (Fed) could bump up interest rates to as high as 5% by March 2023, 25 basis points above its earlier predictions, Bloomberg News reported on Sunday,” per Reuters.

Key quotes

Goldman Sachs Chief Executive Officer David Solomon last week said the U.S. Federal Reserve could hike rates beyond 4.5-4.75% if it does not see ‘real changes in behaviour.’

Goldman's economists added that the journey to 5% hike includes increases of 75 basis points this week, 50 basis points in December and 25 basis points in February and March, the report added.

Goldman cited three reasons for expecting the Fed to hike beyond February -an "uncomfortably high" inflation, the need to cool the economy as fiscal tightening ends and price-adjusted incomes climb, and avoiding a premature easing of financial conditions.

The central bank is expected to raise rates by 75 basis points for a fourth straight time at the conclusion of its next policy meeting on Nov. 1-2.

Betting on a less hawkish Fed has been a dangerous undertaking this year. Stocks have repeatedly rebounded from lows on expectations of a so-called Fed pivot, only to be crushed anew by fresh evidence of persistent inflation or a central bank bent on maintaining its pace of rate increases.

Also read: EURUSD Weekly Forecast: Roles invert with US Federal Reserve and EU Gross Domestic Product coming up next

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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