Fed: Expect the first-rate lift-off in July 2022 – Goldman Sachs

Analysts at Goldman Sachs offer their outlook on the US economy while predicting the Fed’s first interest rate hike in July 2022.

Key quotes

“For the Federal Open Market Committee, Goldman Sachs see what they describe as a "seamless" transition from tapering to rate hikes.”

“They expect the first-rate hike 'lift-off' in July 2022.”

“Core PCE inflation to rise further in the US winter, but eventually falling to low 2% levels, as a transitory inflation boost from durable goods becomes a transitory deflationary drag in late 2022 and 2023.”

“Expect the slowing due to the Delta wave has passed, growth is accelerating again, with a ways to go for the service sector.“

“But declining fiscal support will be a major growth headwind through the end of 2022 as near-term boosts from reopening, pent-up savings, and inventory restocking subside, growth should decelerate to potential by late 2022.”

“Looking for the jobless rate to drop to its 3.5% pre-pandemic low in 2022.”

“Participation is likely to remain below its pre-pandemic trend.”

"Strong labor demand and reduced labor supply should keep wage growth just above 4%, stronger than last cycle but compatible with the Fed's inflation goal.”