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On the heels of the latest U.S. inflation data, Goldman Sachs Research now sees seven rate hikes in the cards from the U.S. Federal Reserve Board for 2022.

In a research note, Goldman said it has raised its forecast for U.S. rate hikes in the year ahead to seven straight hikes of 25 basis points (bps) from five, based on the strength of the latest inflation reading.

The firm acknowledged there are arguments for a 50 bps rate hike in March, but that “most Fed officials who have commented have opposed a 50 bps hike in March.”

As a result, Goldman continues to believe “the more likely path is a longer series of 25 bps hikes instead.”

However, if Fed officials start speaking up in favour of 50 bps rate moves, “we would consider changing our forecast…especially if the market continues to price high odds of a 50 bps move in March.”

Furthermore, “the combination of very high inflation, hot wage growth, and high short-term inflation expectations means that concerns about falling into a wage-price spiral deserve to be taken seriously,” Goldman said. “We could imagine the [Fed] concluding that even a meaningful risk of an outcome as serious as a wage-price spiral requires a more aggressive and immediate response.”

Looking ahead to 2023, the report said, “we continue to expect the [Fed] to hike three more times at a gradual once-per-quarter pace in 2023 and to reach the same terminal rate of 2.5%–2.75%, but earlier.”