Goldman Sachs is predicting the Federal Reserve will be more aggressive with rate hikes following Chair Jerome Powell's comments on rampant inflation. "We now forecast 50bp hikes at both the May and June meetings, followed by 25bp hikes at the four remaining meetings in the back half of 2022 and three quarterly hikes in 2023Q1-Q3," wrote Goldman economists Jan Hatzius and David Mericle in a note to clients late Monday. One basis point equals 0.01%. On Wednesday, the Fed raised interest rates for the first time since 2018 and forecast a plan to hike rates by a quarter point at each of the remaining six meetings of 2022. The central bank next meets in May. But then Powell appeared to up the rhetoric even more on Monday, when he promised to take tough action on inflation . "The labor market is very strong, and inflation is much too high," the central bank chief told the National Association for Business Economics. "If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so." The economists noted that Powell repeated the call "to move expeditiously" at the end of the speech. "There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level, and then to move to more restrictive levels if that is what is required to restore price stability," added Powell. "Our best guess is that the shift in wording from 'steadily' in January to 'expeditiously' today is a signal that a 50bp rate hike is coming," the economists wrote in the note, titled "Moving 'Expeditiously' Implies a Faster Pace." After keeping its benchmark interest rate anchored near zero since the beginning of the Covid pandemic , the Fed said it will raise rates by a quarter percentage point, or 25 basis points. Goldman Sachs left its forecast of the terminal rate unchanged at 3% to 3.25%. — CNBC's Michael Bloom contributed to this report.
