Sticky Inflation and Job Market Tightening Will Push Fed to Hike Rates 4 Times in 2022: Goldman Sachs
Sticky Inflation and Job Market Tightening Will Push Fed to Hike Rates 4 Times in 2022: Goldman Sachs

By Tom Ozimek

Inflation running hotter for longer and further labor market tightening will force the Federal Reserve to hike rates four times rather than three in 2022, according to a new Goldman Sachs forecast.

Jan Hatzius, chief economist at Goldman, wrote in a note Sunday that the investment bank is predicting a fourth 25-basis-point rate hike in December of this year, up from an earlier projection of three. The move would put the target federal funds into a range between 1.0-1.25 percent by the end of 2022. Currently, the benchmark interest rate sits at between 0-0.25 percent.

Hatzius wrote that hawkish signals from the recently released minutes from the Fed’s December policy meeting (pdf), along with sticky inflation and continued recovery in the labor market, suggest a faster path for monetary policy tightening.

The Fed meeting minutes show that members of the Federal Open Market Committee (FOMC) judged that current economic conditions “included a stronger economic outlook, higher inflation, and a larger balance sheet and thus could warrant a potentially faster pace of policy rate normalization.”

Fed officials also said they would likely start the process of reducing the central bank’s $8.8 trillion balance sheet sooner, with the minutes indicating that “participants judged that the appropriate timing of balance sheet runoff would likely be closer to that of policy rate liftoff than in the Committee’s previous experience.”

At the same time, some Fed officials cited in the minutes favored relying more on balance sheet reductions rather than hiking rates to limit yield curve flattening. The Fed’s so-called dot plot, part of its revised December Summary of Economic Projections (pdf), projects three rate hikes in 2022, up from the one that was implied in September’s dot plot but less than Goldman’s newly revised forecast.

Surging inflation in the United States, which in the 12 months through November climbed to its highest level in 39 years, has put pressure on the Fed to accelerate policy normalization. The Labor Department will on Jan. 12 release its consumer price index (CPI) figures, which are a measure of inflation from the perspective of end users of goods and services. Consensus forecasts expect the over-the-year rate of consumer price inflation in December to have accelerated to 7 percent, up from 6.8 percent in the prior month.

“Consensus has moved,” Allianz chief economic adviser Mohamed El-Erian told CNBC’s Squawk Box in a recent interview.

“You have Goldman, you have JP Morgan, you have Evercore, you have a number of analysts now saying that the Fed is going to hike rates four times this year,” he said, adding that he believes these predictions will materialize.

El-Erian added that he wouldn’t be surprised to see December’s over-the-year consumer inflation rate to come in above 7 percent and “well over 5 percent” on the so-called core inflation measure, which strips out the volatile categories of energy and food.

Consensus forecasts predict core CPI inflation in the 12 months through December to come in at 5.4 percent.

“The Fed has an inflation problem and it’s going to have to react,” El-Erian added.

The Fed projects core PCE, a separate but similar gauge to the CPI inflation measure, to come in at 4.4 percent for 2021 and 2.7 percent for 2022, up from the 3.7 percent and 2.3 percent in September’s projections.

Affiliate News Feeds

  • Reuters
  • Washington Examiner
  • The Federalist
  • The Epoch Times
  • The Guardian
  • The Gateway Pundit
  • Judicial Watch

By Patricia Tolson A new survey reveals that the majority of Americans do not trust the integrity of America’s elections. According to a poll conducted among likely General Election voters between Nov. 16–20… [...]

By Louise Chambers When her neighbor, a farmer, fell ill suddenly, a Minnesota teen volunteered to help him tend the land. The farmer was beyond grateful for the support, and the teen… [...]

Sen. Marco Rubio (R-FL) announced on Tuesday that he won’t support legislation to prevent an economically calamitous rail strike if it isn’t supported by the union workers. [...]

The Pentagon believes the Chinese military’s nuclear arsenal can more than triple by 2035. [...]

Abusers in homes across the nation and worldwide have utilized chemical abortion pills in the same way that Herring allegedly did. [...]

Even amid the hedonistic holiday mania, people are still eager to have a fulfilling and joyful Christmas. Christians can help. [...]

Philadelphia District Attorney Larry Krasner “Ignores reality and claims Philadelphia does not have a crisis of crime,” according to the third and final report of the Pennsylvania House Select Committee… [...]

U.S. Rep. Matt Cartwright (D-Pa.) on Tuesday sued the board of elections of a Pennsylvania county that didn’t have enough paper ballots on Election Day for failing to certify his victory by… [...]

Antibody therapy lecanemab removes clumps of protein called beta amyloid that builds up in brainResearchers have hailed the dawn of a new era of Alzheimer’s therapies after a clinical trial… [...]

Groups C and D conclude: check the latest permutationsDaily briefing: the joy of Mbappé, Argentina’s escape planGet in touch: email Martin with your thoughtsThe TV numbers are in. 16.59 million… [...]

As the war against censorship seeps into nearly every facet of our lives, best selling rapper Bryson Gray will soon find out if his stand for free speech and artistic… [...]

While the corporate media such as the New York Times and Wall Street Journal have been writing puff pieces about mega democrat donor Sam Bankman-Fried, independent journalist Ben Armstrong better… [...]

Though years ago India passed a sweeping law giving transgender people rights—and prohibiting discrimination in education, employment, and healthcare—the Biden administration is spending American taxpayer dollars to counter stigma and… [...]

(Washington, DC) – Judicial Watch announced today that it filed a Freedom of Information Act (FOIA) lawsuit against the Department of Homeland Security (DHS) for all communications between the Secret… [...]

NH Politician

NH POLITICIAN is owned and operated by USNN World News Corporation, a New Hampshire based media company specializing in the collection, publication and distribution of public opinion information, local,...