Fed likely to raise interest rates to restrictive territory: Goldman Sachs
Goldman Sachs strategists see Federal Reserve charting an even more aggressive rate hike after the US central bank became increasingly hawkish during its two-day meeting.
Economists at the bank, led by Jan Hatzius, said Thursday in a research note that they expect the Fed to continue raising the federal funds benchmark rate until it hits a target range of 4.5% to 4.75% over their previous estimate of 4%. up to 4.25%. This includes rate hikes of 75 basis points in November, 50 basis points in December and 25 basis points in February.
Forecasts appear shortly after Fed politicians voted unanimously approve a third consecutive 75 basis point interest rate hike.
In addition to significant rate hikes, Fed officials have proposed an aggressive rate hike plan for the remainder of the year. New economic forecasts released after the two-day meeting show policymakers expect interest rates to reach 4.4% by the end of the year, suggesting another three-quarters of a percentage point hike is expected.
The rate hike decision and the latest economic forecasts highlight how committed the Fed is to keeping inflation under control, even if it means the risk of an economic recession.
“We must leave inflation behind,” the Federal Reserve said. Chairman Jerome Powell This was announced during the post-match press conference in Washington. “I wish there was a painless way to do this. He doesn’t exist.”
Goldman economists said Powell’s comments, which they called “somewhat hawkish,” were behind the more aggressive outlook.
“His report on recent economic data focuses more on the road ahead in the fight against overheating than on progress so far, and downplays some encouraging news,” Hatzius wrote.
However, despite a series of aggressive rate hikes, inflation remains stubbornly high.
It was even hotter than expected last month when the consumer price index, a broad measure of prices for everyday goods including gasoline, groceries and rent, rose 0.1% in August from the previous month, dashing hopes for slowdown. Annually, inflation works by 8.3% – almost a 40-year high.
But efforts to fight inflation carry the potential recession riskwith a growing number of Wall Street economists and firms predicting an economic downturn this or next year.
“The chances of a soft landing are likely to diminish to the extent that policies need to be more restrictive or restrictive for longer,” Powell said on Wednesday. “Nevertheless, we aim to bring inflation down to 2%. We think that failure to restore price stability will mean much more pain.”
Credit: www.foxbusiness.com /