As the U.S. Federal Reserve (Fed)’s willingness to aggressively tighten prices has been reaffirmed, experts have hurriedly raised their forecast for the U.S. benchmark interest rate.
According to Bloomberg on the 22nd (local time), Jan Hatchus, a senior economist at Goldman Sachs, predicted in a research note after the Federal Open Market Committee (FOMC) that the Fed will raise its key interest rate by 75bp (1bp=0.01% point) in November, 50bp in December, and 25bp in February next year.
While the Fed raised its key interest rate to 3~3.25% as it took its third giant step (75bp rate hike at a time) last night, the bank predicts that the key interest rate will peak at 4.5~4.75% after the FOMC in February next year as the Fed raises further. It is 50bp higher than the previous forecast.
Goldman Sachs’ outlook came after the Fed released a dotplot that was more hawkish than the market expected. In the updated dot chart, the median of the year-end interest rate forecast suggested by policymakers was 4.4%. Since then, it is expected to rise to 4.6% next year, but fall to 3.9% in 2024 and 2.9% in 2025.
Goldman Sachs said the key interest rate path could change depending on how fast economic growth, employment and inflation slow down next year. “There are risks in both directions, but we believe that the Fed is at a greater risk of raising the interest rate higher than stopping the rate hike early,” he said. However, the bank added that even if inflation continues to be at an uncomfortable level, much could change depending on the Fed’s willingness to control the pace of tightening.
Barclays also adjusted its U.S. benchmark interest rate forecast to the same level as Goldman Sachs. In a post-FOMC report, Barclays economists said, “We expect the U.S. benchmark interest rate to rise 75bp in November and 50bp in December, respectively,” raising the rate hike by 25bp each. It then presented its base rate forecast for the first quarter of next year at 4.5~4.75%, predicting an additional 25bp rate hike during the first quarter.