The Federal Reserve will raise interest rates by a quarter-percentage point at its March, May and June meetings in response to a stronger economic expansion, according to Jan Hatzius at Goldman Sachs Group Inc.
“The recent numbers have been even stronger than expected on the growth side plus we’ve seen some higher inflation numbers for January,” Hatzius, chief economist at Goldman, told Annabelle Droulers on “Bloomberg Daybreak: Asia” on Tuesday.
“I don’t think that necessarily breaks the trend toward disinflation but I think it reinforces the idea that the Fed still has work to do,” he said. “So we think another 75 basis points from here with no cuts until 2024 seems like a more likely outcome.”
The Fed’s preferred inflation gauges this week, along with a groundswell of consumer spending, are seen fomenting debate among central bankers on the need to adjust the pace of rate increases.
The US personal consumption expenditures price index is forecast to rise 0.5% in January from a month earlier, the largest advance since mid-2022.
Asked about the prospects for the Fed returning to 50 basis-point moves, Hatzius was skeptical, while not wanting to rule it out completely.
“It would be a relatively important step because if they do 50 in March, the market would probably build in at least a decent chance of another 50 and so you need to see quite a lot of information to push you in that direction and I just don’t think we’ve seen that.”
Hatzius, speaking in Hong Kong, said spillovers from China’s reopening from Covid restrictions will be positive for growth, particularly in the Asia-Pacific and for countries interlinked with the world’s second-largest economy.
--With assistance from Annabelle Droulers.
This article was provided by Bloomberg News.