The Federal Reserve is set to hike interest rates four times this year and will begin its balance sheet runoff process in July, if not sooner.
- In a research note, Goldman’s Jan Hatzuis stated that rapid progress in the U.S. labor market and hawkish signals in Fed’s meetings from Dec.14-15 point to faster normalization.
- Hatzius further stated that they were pulling forward their runoff projection from December to July, with risks tilted to the earlier side.
- In its Dec. minutes, the Fed officials signaled that they were poised for quicker tightening of the monetary policy to keep the economy from overheating amid surging inflation and near-full employment.
- The minutes further indicated that the economic conditions could warrant a possibility faster rate of policy rate normalization.
Fed officials also saw the scheduling of reducing the $8.8 trillion balance sheet as possibly “closer to that of policy-rate liftoff than in the committee’s last experience.
DXY up +0.20%, EUR USD down -0.30%Source: Bloomberg