Investors Anticipate Rate Hikes

Investors are watching as price and wage increases reach multi-decade highs, challenging the narrative created by the Federal Reserve. The Fed has indicated time and again that it will raise interest rates only when it believes it can safely do so. However, economic data shows that the Fed may need to raise rates quickly and frequently. While an interest rate hike is a serious issue, experts believe that the Fed could raise rates twice next year. In doing so, the Fed would move in front of projections from firms like Goldman Sachs ($GS@US). Goldman also believes that inflation will remain above 3%—higher than the 2% target the Fed has been aiming for. Even though analysts believe that workforce participation is improving, it simply will not reach pre-pandemic levels by next summer. Moreover, they don’t believe numbers can reach what is known as “maximum employment” that was promised by the Fed. The Goldman team noted that, “Since the Federal Open Market Committee last met in September, the unemployment rate has fallen further, average hourly earnings and the employment cost index have posted strong increases, (and) inflation remained high."