“Therefore, we advance our forecast for the reduction of balance from December to July, with the risks leaning towards the side of it doing so even earlier,” Hatzius said. “With inflation likely still well above target at the time, we no longer believe that the onset of balance sheet reduction will replace a quarterly rate hike. We continue to see increases in March, June and September, and now we have added a rise in December.”
In the minutes of their December meeting, Federal Reserve officials noted that they are preparing to act faster than the last time they tightened monetary policy, in an attempt to prevent the US economy from overheating amid high inflation and near-full employment. These conditions, together with a larger balance sheet that is containing the costs of issuing long-term debt, “could justify a potentially faster rate of normalization of interest rates,” according to the minutes.
The officials also considered that the moment to reduce the balance of u $ s8.8 billion would be “closer to the date of raising interest rates than in the committee’s previous experience”, According to the minutes.
The US unemployment rate fell below 4% and wages rose last month, adding to the evidence of a tight labor market. Goldman’s forecast for the terminal funds interest rate remains unchanged at 2.5% -2.75%.
“Even with four hikes, our track record for the fund’s interest rate is only slightly above market prices for 2022, but the gap grows significantly in subsequent years,” Hatzius wrote.
Source From: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
