I think it's natural to have four rate hikes, says Goldman's Hatzius

I think it's natural to have four rate hikes, says Goldman's Hatzius

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00:00
what is your take on clarida's early resignation i wasn't really a surprise that he would be he would be stepping down um i mean obviously we have the confirmation hearings this week for uh chair powell and five share to be brainerd so no surprise here in my view well jana presumably then you don't really feel as if the the composition of the committee is uh is going to be changed in any real way you see uh the
00:32
fed likely to be hiking rates four times this year as well as allowing the balance sheet to shrink what's gone on uh in the last couple of months to to kind of get you to that place is it mostly just the change in rhetoric from the fed is it parts of what we're seeing in the data or or something else the data have been supportive of moving towards tightening but what's changed more recently was that the minutes
01:03
last week basically said they're more comfortable starting the balance sheet runoff earlier than we had expected we previously thought that we would get a hike in march hike in june hike in september and then they would start the balance sheet run off in december and that would substitute for a rate hike now it seems like that's going to happen earlier we think july is probably the start of the balance sheet runoff and in july i don't
01:33
think it's that good a forecast to expect it to substitute for for a hike because inflation is still going to be quite high uh you know we think still close to four percent for poor pc inflation and so i think in that with that kind of runoff call it's more natural to have four heights including a hike in december as well and and really every every quarter well jan jamie dimon ceo of jpmorgan agrees with you he was on cnbc earlier
02:06
today during an interview here's what he said about how many times the fed will raise rates a lot of people project inflation should be 2.3 percent the end of this year i don't i think it's gonna be higher but you know if we're lucky the fed will slow things down we'll have what they call a soft landing you know and it's going to be a little bit like threading a needle so you can't look at anything and say that's my projection because you really don't know this is possible that inflation is worse than they think they have to raise rates more than people think i'd personally be surprised if it's just four increases next year i you know i i think that four increases 25
02:37
basis points is a very very little amount and very easy for the economy to absorb they think they'll go further jan would be surprised if it's only four hikes what are the chances that the fed can engineer a soft landing that is keep the economic recovery going while raising interest rates several times this year so i think it's certainly possible that that would be more i think four is a is a reasonable baseline expectation but there is of course risk in both directions around that the area where
03:09
we're actually further away from market pricing is in terms of where the funds rate ultimately goals the market only has that going to about 1.6 percent or so and we think it's going to be a hundred basis points more than that market is priced for a very low ultimate terminal funds rate and you know we we think too low so that's where the surprises relative to the current market pricing are going to be larger in
03:41
our view what's the chance that they can pull off a soft landing i mean we do have the economy still expanding in 2023 2024 so it's a soft landing in that sense we do expect slower growth much slower growth in in subsequent years because we're bumping up against capacity constraints and and so that's why there does need to be you know i think monetary policy normalization

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