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Goldman Sachs predicts Fed will hike rates 7 times in 2022 over inflation

Goldman Sachs predicted the Federal Reserve will hike interest rates seven times this year — up from earlier forecasts that predicted five rate bumps in a bid to tame out-of-control inflation. Goldman analysts led by economist Jan Hatzius issued the stepped-up prediction in a report this week just as newly released federal data indicates that inflation continues apace. The consumer price index for January posted a 7.5% annual increase — the largest since 1982, the Department of Labor said on Thursday. The investment giant expects the Fed to hike its main rate from its current, near-zero figure to 1.85% after the central bank’s leadership meets for the final time this year in December. The analysts wrote in their report that the Fed will issue incremental hikes by 25 basis points in seven consecutive meetings. In banking, a basis point, the smallest unit of measurement for interest rates, is equal to one hundredth of 1%. Analysts had previously anticipated that the Fed would institute rate hikes by 50 basis points. “Most Fed officials who have commented have opposed a 50 basis points hike in March,” the Goldman analysts wrote in a note. “We therefore think that the more likely path is a longer series of 25 basis points hikes instead.” St. Louis Fed President James Bullard has said that he backs raising interest rates by a full percentage point by July. The last time the Fed raised interest rates by a substantial figure was in 2000, when it announced a half-point hike. Bullard said this week that he has become “dramatically” more inclined to hike rates in order to cool inflation. Former US Treasury Secretary Lawrence Summers told Bloomberg last week that he expects the Fed to raise interest rates at all seven remaining meetings this year. That sentiment was echoed by JPMorgan Chase CEO Jamie Dimon, who said he would be “surprised” if the Fed didn’t hike rates “six or seven” times.

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