Economists at Goldman Sachs Inc. are now predicting that the Federal Reserve will raise the interest rates seven times in 2022 to contain surging inflation in the U.S. against the earlier forecast of five hikes.
The U.S. price index for consumers indicated a 7.5 % increase in January, the most significant jump since 1982. An increase was seen in household furnishings, health insurance, food, and energy and was largely broad-based.
Led by Jan Hatzius, Goldman predicts that the federal will rise by 25 basis points in seven consecutive Federal Open Market Committee meetings.
As per Goldman Sachs analysts Goldman, there is a 50 basis point increase in March due to high inflation, hot growth in wages, and short-term expectations in inflation. However, there are indications of incremental gains. Most Federal officials are against the hike in March. There will be 25 basis point hikes in the long run.
James Bullard, President of Federal Reserve Bank of St. Louis said that he supports interest rate hike by a full percentage point from July onwards, including the first half point hike since 2000 as a response to the highest inflation seen since 1982.
Analysts at Goldman said that they would revise their forecast if others join Bullard and if the market continues to bet on the 50 basis points increase in March.
Lawrence Summers, the U.S. Treasure Secretary remarks, was mirrored by Goldman. Summers told Bloomberg Television last week those investors are bracing for Federal to raise interest rates in all the seven policy meetings remaining this year. It is even possible for it to hike by more than a quarter points in one go. Banks globally are ramping up for the aggressive hiking cycle this year.
Economists at Deutsche Bank AG feel that inflation data has made them get ready for a 50 basis point hike as their base case. They think that with limited evidence that inflation pressure is waning, suggestions are that Fed will pursue their aggressive stance longer. Economists at the German Bank said they predicted that 25 basis point moves at every Fed meeting will increase to 175 basis points in 2022.
Standard Chartered said that the inflation data had unleashed a storm while Nomura Holdings Inc. is doubling down their call for a half percentage point hike in March. As per Deutsche economists, the hiking cycle can still threaten global recovery.
