Goldman Sachs sees new rate hike in 2023, with targeted range for fed funds rising to 5%-5.25%

Goldman Sachs Group
GS,
-0.14%
is revising its expectations for interest rates next year, saying it now expects an additional 25-basis-point rate hike in May. That additional rate hike pushes the firm’s forecast for the peak fed funds rate, or highest level at which the Federal Reserve will likely raise rates, to between 5% and 5.25%, up from a previous forecast of 4.75% to 5%. Jan Hatzius, David Mericle and others at the firm said they’ve seen upside risks to their forecast for a while, and cited the possible need for more hikes to keep the economy on a path of below-potential growth, among other things. They also said that an overreaction to better inflation data could cause “a premature easing in financial conditions” that the Federal Open Market Committee “might have to counteract.”