VIEW: Goldman Lift Terminal Rate Call

Goldman Sachs note that “in his prepared remarks before the Senate Banking Committee, Fed Chair Powell noted that the terminal fed funds rate “is likely to be higher than previously anticipated” in light of the recent growth and inflation data and that the FOMC would be “prepared to increase the pace of rate hikes” if the data suggest a faster pace is warranted. We expect the data ahead of the March meeting to be mixed but firm on net, and we therefore see our standing forecast of a 25bp hike in March as a close call, with some risk that the FOMC could hike by 50bp instead. Whether the FOMC hikes by 25bp or 50bp, we expect that the median dot will rise by 50bp at the March meeting to show a peak rate of 5.5-5.75% in 2023. We have raised our own forecast of the peak rate by 25bp to 5.5-5.75% as well.”