Goldman Sachs Boosts Rate Outlook to 5%

Federal Reserve policymakers will hold a two-day meeting this week, with an announcement on their latest monetary policy decision expected on Wednesday. Economists widely anticipate another interest rate hike by 75 basis points, bringing the federal funds rate to 3.75% to 4%.

Goldman Sachs economists said they expected the central bank will lift its benchmark rate to a range of 4.75% to 5% in March, 25 basis points more than earlier expected. The projection assumes an increase by 75 basis points this week, 50 basis points in December, and 25 basis points in February and March. The economists cited three reasons for the Fed hikes beyond February, including “uncomfortably high inflation,” the need to cool the economy, and to avoid a premature easing of financial conditions.

On Friday, the government reported that the Fed’s favored measure of inflation, the Personal Consumption Expenditures Price Index (PCE), rose 0.3% in September, at the same pace as in August as prices continued to climb. The index was up 6.2% from a year ago, also at the same rate as the month before.

On Friday, the BLS will release the latest jobs report for October, possibly showing the impact of the Fed rate hikes on employment. The economy is expected to add 200,000 nonfarm payrolls after a gain of 263,000 in September. The unemployment rate is seen edging up to 3.6% from 3.5%, near half-century lows.