US Fed could raise rates more than 4 times this year due to inflation: Goldman Sachs

Given the rising rate of inflation in the United States, the Federal Reserve could adopt an aggressive policy and raise interest rates at a faster pace than expected, according to analysis by Goldman Sachs, an investment bank and multinational financial company based in the United States. Services Society.

David Mericle, an economist at Goldman Sachs, said that although the market is already expecting four quarter-percentage-point hikes this year, the rise in Omicron business could prompt the Fed to raise the cost of borrowing ” every Federal Open Market (FOMC) until the inflation picture changes.” He added, however, “Our baseline forecast calls for four hikes in March, June, September and December.”

The analysis report comes just two days before the FOMC’s proposed two-day meeting on Tuesday. While market watchers don’t expect the FOMC to raise interest rates at the two-day meeting, they predict officials could reach a consensus on achieving a hike in March, which would be the first increase in the Federal Reserve’s benchmark rate since December. 2018.

Meanwhile, according to the CME’s FedWatch tool, the odds of the FOMC raising the interest rate five times this year have risen to nearly 60%. If that happened, it would be the Fed’s most aggressive policy since the dotcom bubble of the late 1990s.

Additionally, some market watchers are also predicting that the FOMC will end its monthly bond-buying program at next week’s meeting. However, Goldman Sachs does not expect that to happen at the two-day meeting, starting Tuesday.

Right now, the inflation rate in the United States is at its highest 12-month pace in nearly 40 years. The annual inflation rate was estimated at 7% for the 12 months ending December 2021, the highest since June 1982.

(Edited by : Thomas Abraham)

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