The US Federal Reserve will launch a hiking spree this year as the world’s most influential central bank zeroes in on spiralling inflation in America, according to City analysts.
The Fed will hoist interest rates at least four times in 2022 in a bid to tame red hot price rises that are already seeping into every corner of the US economy, said investment banking giant Goldman Sachs today.
“We continue to see hikes in March, June, and September, and have now added a hike in December for a total of four in 2022” taking US interest rates to one per cent by the end of the year, Goldman said.
Minutes from the central bank’s latest meeting published last week revealed Fed policymakers have tilted hawkish.
Members of the Fed’s Federal Open Market Committee agreed “it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” the minutes said.
Fed chair Jerome Powell announced last month the central bank will speed up the pace of removing its stimulative bond buying programme, meaning it will now end in March.
Strong inflationary pressure emanating from an increasingly tightening US jobs market will coax the Fed into reining in stimulus to get a hold of the soaring cost of living.
Firms have been lifting pay in a bid to attract talent amid a shallower worker pool, strengthening incentives for them to hike prices in a bid to protect margins.
Americans have been quitting jobs at historically high levels, while openings have stayed persistently elevated, highlighting the tightness of the labour market.
The prediction comes as economists are bracing for fresh US inflation estimates to be released on Wednesday.
Experts expect the rate of price rises to climb even higher above a 39-year high of 6.8 per cent, with consensus predictions landing at 7.1 per cent.
“Consumer prices will be boosted by a sizeable increase in used vehicle prices in December,” said Paul Ashworth, chief North America economist at Capital Economics.