Goldman Sachs Group expected raise US Federal Reserve interest rates 7 times in 2021, to contain higher-than-expected inflation in the United States, instead of the 5 times it predicted earlier.
Economists led by Jan Hatzius wrote in a report to clients that the bank expects to raise rates by 25 basis points at each of its remaining meetings this year.
These expectations, which differ from previous expectations, come on the heels of consumer prices (inflation rates) in the United States recording the largest jump since 1982 in January.
This view is also gaining in popularity among investors, who are pricing in the same amount and pace of increases. Expectations related to the Fed meeting dates indicate that investors are looking forward to the Fed’s key interest rate to be 1.85% following the December meeting compared to zero now.
Whereas, a 50bp hike in March is justified given very high hybrid inflation, high wage growth and high inflation expectations in the short term.
But most Fed officials opposed a 50bp hike in March, so Goldman Sachs economists believe the most likely path is a longer series of 25bp hikes.
