Via a client note from economists at Goldman Sachs following the Federal Open Market Committee (FOMC) interest rate hike and higher dot plot revisions.

(If you missed the news from mid-week:


Goldman Sachs:

  • In our view, if rate hikes solve the inflation problem without a recession, the FOMC would most likely wait until something goes wrong to cut rather than cutting just for the sake of returning to neutral
  • the Fed does not have enough confidence in its neutral rate estimate of 2.5% for it to cut rates

GS rate forecasts to take the fed funds rate seen rising to 4.6% by year-end:

  • Federal Open Market Committee (FOMC) will hike rates by 75 basis points at its November meeting
  • another 50 basis points rise in December

GS looking ahead to 2023, the path of the funds rate in 2023 will depend on two issues:

1. how quickly growth, hiring and inflation slow. While there are risks in both directions, we see more risk that a higher peak rate will be needed to reverse overheating than that the Fed will stop earlier

2. whether FOMC participants will really be satisfied with a sufficiently high level of the funds rate and willing to slow or stop tightening while inflation is still uncomfortably high

Remaining 2022 meetings:

fomc dates 2022 33