Goldman Sachs: 5x interest rates in 2022

Goldman Sachs (NYSE:GS) is forecasting that the Federal Reserve will raise interest rates five times in 2022, up from the previous four, with a hike expected in March, economists at Goldman Sachs said late Friday.

Economists have been scrambling to update rate hike expectations after the Fed said on Wednesday it was likely to hike rates in March and reiterated plans to end its bond purchases this month, which Fed Chair Jerome Powell called marked an ongoing struggle to contain inflation.

Concluding Wednesday's meeting, Powell said that a decision would be made in the coming months as to when the central bank would start deleveraging its Treasury and mortgage-backed securities.

Goldman economists David Mericle and Jan Hatzius said in the note that they expect the Fed to hike rates in March and May and announce the start of its balance sheet reduction in June, followed by rate hikes in July and September. They then expect the Fed to return to a quarterly rhythm in Q4 and hike rates in December to end the year at 1.25-1.5%.

Economists said they revised upwards their inflation expectations after this week's data, while "Chairman Powell's comments earlier this week made it clear that Fed leaders are open to a more aggressive pace of tightening."

Goldman continues to expect three rate hikes in 2023 and the Fed to hit the same final rate of 2.5-2.75% in 2024.

In early January, Goldman was expecting four rate hikes this year and the balance sheet shrinking process to begin as early as July.