Goldman Sachs is outdoing everyone’s interest rate predictions by forecasting two rate hikes this year.
In a new report, Goldman says that consumer spending will increase as GDP growth stays steadily around 3% for the rest of the year, reports ValueWalk. Goldman has been predicting a September rate hike, but one small rate hike may not be enough. Rates must go higher, and analysts are underestimating the impact of such a move, Goldman says. Writes ValueWalk:
“The beginning of the hiking cycle could unleash a build-up of term premium, while it is hard to imagine a further compression barring a sharp deterioration in the growth outlook,” Goldman writes.
The June Fed meeting began Tuesday and is set to end Wednesday. Economic data has been on track to surpass expectations since the last meeting, making a September rate hike more likely. Goldman sees a 2.75% yield for the U.S. 10-year note by the end of 2015, and a subsequent move to 3.15%.
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