Four hikes in the US interest rate, as well as the sale of the Federal Reserve’s assets, are expected this year, Goldman Sachs Group said.
The balance sheet runoff process – which is the reduction of an entity’s assets – could take place in July, or even earlier, Bloomberg reported, citing the investment bank.
This is compared to Goldman’s previous forecast that the process would start in December.
The firm said this shift in projections was driven by a momentum-gaining labor market and potential hawkish policies which were revealed in the minutes from the Dec. 14-15 Federal Open Market Committee meeting.
As inflation will probably remain above target, the New York-based firm predicts rate hikes in March, June, September and December. They also reversed their earlier projection, which stated that the start to the runoff won’t require a quarterly rate hike.
In its last meeting, the Federal Reserve indicated that it is pushing for a quicker tightening and normalization of monetary policy. This is to combat strong inflationary pressures and an economy approaching full employment.
Wages increased and the country’s unemployment rate declined to under 4 percent last month, signaling a tight labor market.