The latest forecast from the Goldman Sachs (GS) economic team suggests that the first hike in the U.S. federal funds rate will come in the third quarter of 2015, rather than in the first quarter of 2016.
Several factors including “the cumulative changes in the job market, inflation, and financial conditions over the past few months” prompted the central bank’s new forecast, Goldman’s chief economist Jan Hatzius said [via MW] in a note to clients Sunday.
Hatzius also said that while the revised Fed’s target funds rate forecast is close to current market expectations, the change is significant because it marks the first time since the financial crisis that Goldman Sachs has moved forward its rate-hike expectations. Since Dec. 2008 the target for the fed funds rate has been in a range of between zero and 0.25 percent.
“We view this as an illustration of the substantial progress that the U.S. economy has made in overcoming the fallout from the housing and credit bubble,” Hatzius said.
Goldman now expects the Federal Open Market Committee to rise funds rate gradually back to 4% by 2018, MW said.