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FED
Despite the discussion of tapering at the June FOMC coming in largely in line with Goldman Sachs' expectations, the 2 hikes in 2023 in the dot plot was "particularly striking because the 2023 core PCE inflation forecast remained steady at 2.1%".
- To Goldman, this can be explained by the FOMC taking "a more firmly backward-looking interpretation of average inflation targeting than we had assumed", lowering the future inflation bar for liftoff, vs a larger sustained overshoot of 2%.
- They point out that inflation will have already average over 2% by 2021, so the hiking dots for 2023 represent a hawkish interpretation of the flexible average inflation targeting framework.
- "We had previously assumed that the Fed leadership would instead desire a larger sustained overshoot of 2% to hammer home its commitment to the new framework in the very first cycle where it is in place."
- As such, Goldman brought forward its forecast for rate liftoff to 3Q 2023 from 1Q 2024 previously.
Source: Goldman Sachs
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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