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Goldman Sachs Raises Fed Rate Expectations to 5.5-5.75%

Goldman Sachs economists have revised their forecast for the Federal Reserve’s interest rates, predicting a range of 5.5-5.75% following remarks from Fed Chairman Jerome Powell. In a memo to clients, a team led by Jan Hatsius stated that the outlook for the US economy remains strong, but they warned that upcoming data may be skewed. Despite the uncertainty, the economists predict a rate hike of 0.25% in March, with a possibility of the Federal Open Market Committee (FOMC) raising rates by 0.50% instead.

The FOMC is due to meet on March 21-22, when officials will update quarterly forecasts. Last December, the FOMC’s forecast indicated that the maximum interest rates would range between 5-5.25%. However, economic data in January was stronger than expected, prompting Powell to caution lawmakers that the Fed’s interest rate cap may be higher than previously forecast. The Fed is also ready to raise rates further if necessary.

Goldman Sachs’ revised forecast suggests that the median interest rate in the March economic summary forecast will increase by 0.50 percentage points to a high of 5.5%-5.75% in 2023. This represents a significant revision from their earlier forecast, reflecting the possibility of an imminent rate hike by the FOMC.

As the US economy continues to recover from the pandemic, the Federal Reserve has been grappling with the challenge of balancing inflationary pressures with the need to support economic growth. With the FOMC set to meet later this month, all eyes will be on their decision regarding interest rates, which will have significant implications for the US economy and financial markets.

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