NEW YORK, Jan 29, Reuters -- Goldman Sachs GS.N is forecasting that the U.S. Federal Reserve will raise interest rates five times in 2022, compared to four previously, with a hike expected in March, according to a note from its economists late on Friday.
Economists scrambled to update rate hike expectations after the Fed said it was likely to hike interest rates in March and reiterated plans to end its bond purchases that month in what Fed Chairman Jerome Powell pledged will be a sustained battle to tame inflation. At the end of Wednesday s meeting, Powell said a decision would be made in the coming months on when to start shrinking the central bank's government bonds and mortgage-backed securities. Goldman economists David Mericle and Jan Hatzius said in the note that the Fed is expected to hike rates in March and May and announce the beginning of its balance sheet reduction in June, then hikes in July and September. They expect the Fed to return to a quarterly pace in the fourth quarter, with a hike in December to 1.25 -- 1.5%.
The economists said they had revised up their inflation path expectation after the data was released this week, while Chair Powell said earlier this week that the Fed leadership is open to a more aggressive pace of tightening. Goldman said in 2023 it expects three hikes and the Fed to reach the same terminal rate in 2024, which is 2.5 -- 2.75%.
Goldman said earlier in January it expected four hikes this year and that the balance sheet reduction process will begin as soon as July.