Goldman Sachs Sees 5 More Fed Rate Hikes Through 2019

Goldman Sachs Sees 5 More Fed Rate Hikes Through 2019

Goldman Sachs Sees 5 More Fed Rate Hikes Through 2019

$GS

  • President Trump is calling Fed’s rate hikes “crazy” and warning they would hurt the growing US economy.

Thursday, Goldman Sachs (NYSE:GS) economists said the firm remained “comfortable” with its call for 5 more interest rate hikes, that is 2X than priced in financial markets through the end of Y 2019.

In a note to clients, Goldman said it feels the Fed needs to generate a significant tightening in financial conditions to slow the economy to its potential growth pace sooner rather than later, and “that this will require delivering significantly more hikes than priced in the curve.”

Meanwhile, the Fed should continue with its gradual rate hikes but must be prepared to slow the tightening if US productivity breaks out of a several-year lull, as it may be poised to do, an influential Fed governor said Thursday. He painted a somewhat more optimistic picture than his colleagues on the economy’s longer-term capacity, and said he favored a bit more dovish path than most others at the central bank.

“Absolutely, my path for policy is more gradual” than most other Fed policymakers, said Randall Quarles, the central bank’s Vice Chairman for supervision and point person on regulating banks.

For now, because it remained hard to tell where the currently strong economy would settle in the years ahead, the Fed should continue with its “stable, gradual, and predictable” approach of about one rate hike per Quarter, he said.

The Fed should “follow that course through the temporarily shifting and sometimes conflicting signs from the economy unless some strong and steady signal requires a firm but moderate correction,” he told the Economic Club of New York.

The comments from VC Quarles, an appointee of President Donald Trump, reinforced expectations for tightening into next year. But they also pushed back on worries that a hot labor market would soon spark inflation and a more aggressive Fed response, which could truncate the near-record long economic expansion.

President Trump himself has ramped up criticism of the Fed’s rate hikes, calling them “crazy” and warning they would hurt the economy.

The comments from Mr. Quarles reinforced expectations for tightening into next year. But they also pushed back on worries that a hot labor market would soon spark inflation and a more aggressive Fed response, which could truncate the near-record long economic expansion.

President Trump is calling Fed’s rate hikes “crazy” and warning they would hurt the growing US economy.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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