The Strategist

Goldman Sachs expects seven Fed rate hikes by the end of 2022

02/14/2022 - 10:50

The U.S. Federal Reserve will raise the rate seven times during the year, according to analysts at Goldman Sachs. In their view, the U.S. regulator will increase the rate by 0.25% at each meeting in order to curb price increases.

The Federal Reserve (Fed) in 2022 will raise the rate seven times to curb inflation, expects Goldman Sachs, writes Bloomberg. Earlier, Goldman Sachs expected five rate hikes this year. The bank predicts that the Fed will raise the rate by 25 bps at each of the remaining meetings this year.

Despite the grounds for raising the rate immediately by 50 basis points in March, analysts at Goldman Sachs believe the regulator will still do it gradually throughout the year, notes Bloomberg. The Fed has to raise the rate because of high inflation and short-term inflationary expectations, and also fast growth of wages. 

However, most Fed officials who spoke about the rate opposed its sharp increase at a meeting in March, said in a research note. At the same time, James Bullard, president of the Federal Reserve Bank of St. Louis, noted that he supports a rate hike of 1 p.p. by early July, the agency points out.

At the same time the baseline scenario of Deutsche Bank economists assumes the rate increase in March by 50 p.p. They believe the Fed will continue to take aggressive measures. After raising the rate by 50 p.p. the authority will be raising it by 25 p.p. at every meeting this year except the November one, resulting in a total rate increase of 175 p.p., German experts believe. They note that tight monetary policy increases risks of economic slowdown.

HSBC forecasts a 50bp increase in the Fed Funds rate in March and four additional 25bp hikes during the year.