Goldman Sachs expects 3 more Fed rate hikes this year

Goldman Sachs now expects the U.S. Federal Reserve to raise interest rates three more times this year.

That call comes following the latest inflation data which was released this week.

The bank sees a hike of a quarter of a percentage point each.

Producer prices accelerated in January by the biggest margin in seven months.

WHOLESALE INFLATION SURGES 0.7% IN JANUARY, MORE THAN EXPECTED

That was reflected in one report on Thursday, while another showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.

Consumer prices rose 6.4% in January on an annual basis, hotter than expected, but remained steady compared to last month. 

“In light of the stronger growth and firmer inflation news, we are adding a 25bp (basis points) rate hike in June to our Fed forecast, for a peak funds rate of 5.25-5.5%,” economists led by Jan Hatzius said in a note on Thursday.

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Money markets are currently pricing in a rate of 5.3% by July.

Before the latest data was released, a majority of the economists expected the Fed to raise rates at least twice more in coming months, according to a Reuters poll.

INFLATION ROSE 6.4% IN JANUARY

Before the recent data, J.P.Morgan had forecast a funds rate of 5.1% by the end of June, while BofA Global Research had forecast a rate in the range of 5.0% to 5.25% by the end of the year.

Reuters contributed to this report.