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Impact of Jerome Powell’s statement, Goldman Sachs increases Fed rate hike forecast

by Trend News
2 minutes read
Jerome Powell

A statement by Jerome Powell, chairman of the US Federal Reserve, has created a stir in the entire market. On Tuesday, Powell said that interest rates could rise faster than expected. He said that the current trend indicates that the fight against inflation is not over yet.

Powell’s hawkish stance on interest rates

Prior to Powell’s statement, some members of the Fed were predicting that the interest rates would increase only by a quarter of a percent, but now this latest statement has created turmoil. Now it is being estimated that this time the interest rates will increase by 50 bps. In view of Powell’s hawkish stance, economists at Goldman Sachs have increased their forecast for the Federal Reserve rate to 5.5%-5.75%.

Now estimated to increase by 50 bps

After Tuesday’s hearing before the Senate Banking Committee, economists led by Jan Hetzius wrote in a note to clients that “we see mixed data ahead of the March meeting, so we raise our forecast for March by 25 bps.” Accept the hike, but with some risk, the Fed can increase the rates by 50 bps. We now estimate that the median point in the March Summary of Economic Estimates will increase by 50 basis points to a peak of 5.5%-5.75% in 2023.

Fed meeting will be held in March

The Federal Open Market Committee (FOMC) meeting is scheduled for March 21-22, when officials will provide quarterly forecasts for December increases in the range of 5%-5.25%, according to the median projection. After Powell’s statement, investors raised bets that the Fed would hike rates by 50 basis points later this month.

Economists at Goldman wrote that ‘even if FOMC participants decide to hike by 25 basis points in March, opinion is divided on how fast it will happen. So they can settle for an increase of 50 basis points in the peak fund rate shown in the dot plot.

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