Goldman Sachs sees Fed rates peak at 5% in March

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(Reuters) – Economists at Goldman Sachs Group Inc said the U.S. Federal Reserve could raise interest rates as much as 5% by March 2023, 25 basis points above its previous forecast, reported Sunday Bloomberg News.

Goldman Sachs CEO David Solomon said last week that the US Federal Reserve could raise rates beyond 4.5-4.75% if it doesn’t see “real behavioral changes”.

The Federal Reserve’s next meeting could shed some light on how long it will stick to aggressive monetary policies.

Goldman economists added that the trip to a 5% rise includes increases of 75 basis points this week, 50 basis points in December and 25 basis points in February and March, the report added.

The report says Goldman cited three reasons for expecting the Fed to hike beyond February – “uncomfortably high” inflation, the need to cool the economy as fiscal tightening ends and incomes adjusted prices rise, and to avoid a premature easing of financial conditions.

Goldman Sachs did not immediately respond to a request for comment from Reuters.

The central bank is expected to raise rates by 75 basis points for the fourth consecutive time after its next policy meeting on November 1-2.

Betting on a less hawkish Fed has been a dangerous business this year. Stocks repeatedly bounced off lows expected from a so-called Fed pivot, only to be crushed again by further evidence of lingering inflation or a central bank determined to maintain its pace of rate hikes. .

(Reporting by Mrinmay Dey in Bengaluru; Editing by Tomasz Janowski)

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