Goldman Sacks, BofA Predict 3 More Interest Rate Hikes in 2023

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Major banks have recently weighed in with their expectations for additional Federal Reserve interest rate hikes, forecasting that the central bank will raise those rates three more times before the end of 2023. That’s according to Reuters, which cited predictions from both Goldman Sachs and Bank of America.

Goldman Sachs reportedly based its new forecast on the most recent Producer Price Index (PPI) report, which showed that wholesale prices increased more than previously expected. The numbers for January indicated that those price increased jumped by the largest margin in more than six months, with a hike of 0.7% for the month.

Other concerns included a 6.4% annual jump in consumer prices for January, which was similar to the previous month’s results. In addition, another report suggested that the labor market remains far hotter than the Fed would prefer at this point in time, with an unexpected decline in new unemployment benefit filings.

Prior to the forecast change, economists had been anticipating that the Federal Reserve would announce two more interest rate hikes in the months ahead. However, the Fed has been clear that its primary mission right now is to get inflation under control, and most observers expect that Chairman Jerome Powell will continue to tighten policy until the central bank sees the economy cooling and price increases easing.

In a note last week, Goldman Sachs chief economist Jan Hatzius wrote that his team was expecting an additional interest rate hike to come in June. According to the note, Goldman expects that hike to be another 25 basis point increase. The bank is forecasting a peak funds rate between 5.25 and 5.5% by the end of spring.