Economist Forecasts the Fed Won’t Cut Rates for Years

Monster Ztudio / shutterstock.com
Monster Ztudio / shutterstock.com

2022 has been the year of the Federal Reserve sticking it to the American consumer. With inflation running rampant due to Joe Biden’s horrific policies, the Fed has had little choice but to change rates for loans here in the country. It was the only way to tame inflation, and yet President Biden has continued shoving his failed policies down our throats as things only continue to get worse.

Goldman Sachs’ Jan Hatzius doesn’t see an end to this increase before the end of 2022, or even in 2023. While he and other economists from the firm are forecasting the fed to only institute a 50-point hike following their two-day meeting on December 13th-14th, the proposed 75-point hike is still on the table. This would bring the Fed rate to 4.25% or 4.50% following the four straight 75-point hikes, that saw November earn the title of the highest rates in 15 years.

This warning has set off a massive plunge in the stock market, only fueling fears that inflation will continue to persist and that the rates will do nothing but climb. In turn, companies will be once again forced to raise prices to offset the costs of doing business. While many saw forecasts tapering inflation, and that gave early December a bit of a run in the markets, it was too good to be true.

With 2023 only right around the corner, many investors have been waiting to see the rates go down, but Hatzius doesn’t see that happening. Rather, he expects the Fed to agree to another 25-point hike in the points but doesn’t rule out the possibility of a 50-point hike either.

In a written Q&A on December 5th, he said “Beyond February, our forecast is above market pricing, as we see two more 25bp hikes in March and May and no cuts until 2024 as the economy remains more resilient than projected by most forecasters and market participants.”

These base point hikes have put the housing economy, particularly, in a stranglehold. The American people have been searching for better rates and homes to buy as the increased Fed rate has made housing prices drop in many areas. In places experiencing population bumps like Tampa, FL, Boise, ID, or Austin, TX, it just isn’t enough. For these cities, they need the rates to drop as soon as possible. Especially since the housing price has not plummeted accordingly with the interest rates.

Other industries like automotive, food & beverage, and entertainment are also being deeply impacted by these rate hikes and inflation. US-based bands like Shinedown, Five Finger Death Punch, and others have been unable to tour as frequently or as widely as in years past. The security from COVID stopping the tour, getting visas, and money to even go out on tour has dried up.

Thankfully, it seems that some relief is on the horizon.

Hatzius pointed out Fed Chairman Jerome Powell’s strong notation of alternative indications for rent increases that help track inflation has signaled that the Chairman “won’t be held hostage,” to the slowed-down traditional economic indications that the Federal Open Market Committee uses for inflation. “In that sense, it has further reduced the risk that the FOMC will trigger an avoidable recession.”

This is some good news for all Americans, and it means the likelihood of an all-out collapse that would only complicate things is far less likely now, or even in the immediate future.