It's time to gear up for two 50-point hikes in May and June, says Goldman
(Kitco News) Investors should be on the lookout for an aggressive Federal Reserve, said Goldman Sachs, projecting two 50-basis-point hikes at the May and June meeting followed by 25-point hikes at the remaining four meetings of the year.
"We now forecast 50bp hikes at both the May and June meetings, followed by 25bp hikes at the four remaining meetings in the back half of 2022 and three quarterly hikes in 2023Q1-Q3," Goldman economists Jan Hatzius and David Mericle wrote in a note on Monday. "Our best guess is that the shift in wording from 'steadily' in January to 'expeditiously' today is a signal that a 50bp rate hike is coming."
Goldman's terminal rate remained between 3% to 3.25%.
The updated projections come after Fed Chair Jerome Powell took a clear stance on inflation on Monday, stating that it is "much too high" and urging that the time to act is now.
"If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so," Powell said at the National Association for Business Economics conference. "The risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously."
#Powell stresses the need to act now: "risk is rising that an extended period of high #inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously"— Kitco NEWS (@KitcoNewsNOW) March 21, 2022
At its March meeting on Wednesday, the Fed raised its interest rate by a quarter-point for the first time since 2018.
|Inflation will stay at 6% to 9% until 2024, Fed's rate hikes won't stop that now - Steve Hanke|
Following the rate decision, Powell told reporters that the U.S. central bank is projecting six more rate hikes in 2022, noting that the economy "can handle" tighter monetary policy.
"The FOMC acutely feels [the need] to restore price stability," and it is prepared to use all of its tools, Powell said.
#POWELL on U.S. #economy and higher rates -- "I believe that the historical record provides some grounds for optimism: Soft, or at least soft-ish, landings have been relatively common in U.S. monetary history."— Kitco NEWS (@KitcoNewsNOW) March 21, 2022
The next Fed meeting is scheduled for May, followed by June, July, September, November, and December.