Goldman Changes Fed Forecast: Sees Rate Hikes In March, June And September; Earlier Balance Sheet Reduction

Tyler Durden's picture

While we suggested that the lack of a solid rebound in average hourly wages clouded the Fed's intentions on future rate hikes after March, Goldman had no such doubts and in a report issued moments after the "solid jobs report", Goldman's chief economist Jan Hatzius revised his forecast for upcoming FOMC moves, pulling forward the next two rate hikes, expecting interest rate increases in March, June and September, up from the previous March, September and December. More importantly, Goldman now also expects the Fed to start its "balance sheet normalization to Q4 2017 from mid-2018 previously."

The full note:

Fed Call Change on Solid Jobs Report

BOTTOM LINE: Following the better-than-expected February employment report we have made a few modest changes to our Fed call for 2017. We now look for funds rate increases in March, June, and September (compared to March, September, and December previously), and have pulled forward our forecast for the start of balance sheet normalization to Q4 2017 from mid-2018 previously.




Nonfarm payroll employment increased by 235k in February, more than expected by consensus forecasts, and the underlying details of the report generally looked solid. As a result of the strong jobs numbers, benign financial conditions, and recent communication from FOMC participants, we are making a few modest changes to our Fed call for this year. Specifically, while we continue to expect three rate increases in 2017, we now look for a March hike to be followed by rate increases in June and September (versus September and December previously). In addition, we have changed our forecast for the start of balance sheet normalization: we now expect the committee to end full portfolio reinvestment in Q4 2017, instead of mid-2018. Under our forecasts for the US economy, we see it as a close call as to whether the FOMC would raise the funds rate four times this year or hike three times and begin balance sheet normalization. But for a variety of reasons—including considerations around the transition to a new Fed Chair in 2018—we see earlier balance sheet normalization as slightly more likely than a fourth funds rate increase.

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Seasmoke's picture

It's the Obama Poison Pill, left for Donald Trump. 

stizazz's picture

Rate hikes? Really? What are these people thinking?

eclectic syncretist's picture

Running up the petrodollar before time runs out.

TrollandDump's picture
TrollandDump (not verified) xythras Mar 10, 2017 9:34 AM

Trump kept mum about Vault7. And you would think that it would support his wiretap accusations

John Law Lives's picture

What is it going to take for an administrator at ZeroHedge to get this spammer, xythras, off of this site?

Bryan's picture

Seriously.  What happened to the narrative that rate hikes would make the national debt interest unpayable?  Or was that all a lie too?

PT's picture

Bryan:  Yeah, but Trump got in so now they don't care.

Bryan's picture

You're probably right.  Burn the thing down, then?

NihilistZerO___'s picture

We owe over a third of the debt to useless through FED monetization. They Treasury counts interest paid to the FED on it's Treasury holdings as INCOME! Either the FED shrinks its balance sheets by letting expiring Treasuries roll off OR it buys new debt issuance at higher interest rates which then brings MORE income to the Treasury through the accounting trick. There's going to be a ton of 10 year debt dropping off the FEDs balance sheet over the next few years as the initial post crisis QE bonds expire.  A modest raise in rates will likely be debt servicing neutral as the "balance sheet normalization" means less outstanding interest bearing treasuries held by the FED.

Winston Churchill's picture

They just follow their orders, no thinking involved.

thunderchief's picture

I think they are gunning for a collapse in everything. 

Bond market crash is the real deal, not the stock market prop ponzi or gold price suppression. 

I think these people are finally bored with the same old same old the last 8 years,and want to "bring it on"..just like GW.. how'd that work for Ya'll?

Bring it on Yellen,  Bring it On!

BorisTheBlade's picture

Maybe GS wants to help the Fed to reduce its balance sheet and by extension revive the entire economy, i.e. take back these wonderful tranches of MBSs that were sitting on Fed's balance sheet since 2008? I mean Fed promised back when they were buying those assets that they will be sold on the market, only fitting when they are considering raising interest rates that these assets start generating some yield again and can finally be carried on a mark-to-market basis :D

small axe's picture

My name is Steven Mnuchin and I approved this message

BigFatUglyBubble's picture

Yale Skull n' Bones Stamp of Approval.


Arnold's picture

So... going long now means holding more than 24 hours?

cowdiddly's picture

Your brave. Put the buy and sell order in at the same time.

BigFatUglyBubble's picture

What's that hissing sound?

MFL5591's picture

Make it up as you go.  Perfect con by the tribe!

Dr. Engali's picture

Yeah right. Invert that fucking curve, I dare you.

Muad'Grumps's picture

They will invert it. And they know it.

ejmoosa's picture

Let me get this straight.

The rate of annual job growth continues to slow.  BUT because the jobs number for Feb was better than what some folks felt it would be, we anticipate more rate hikes.


Nothing like using Common Core math concepts to drive economic decisions.

PT's picture

Only mathematicians care about the numbers.  And what are they going to do about it?

Violent people will get their share.  Everyone else will share whatever is left.  "Economists" will blabber meaningless words and meaningless ideals to justify whatever it is that the violent people are doing.

Was it the eighties that coined the term, "Creative Accounting"?  We've "progressed" since then.

BigWillyStyle87's picture
BigWillyStyle87 (not verified) Mar 10, 2017 9:27 AM

LoL oh yeah baby, lets see that balance sheet get reduced. I have been dieing for 3 years now to see them even try it.


The only people that dont know Goldman is trying to unload its dollar longs are the muppets they will be assfucking in the next couple months.

Carl LaFong's picture

Absolute GS Bullshit.

Quinvarius's picture

It is impossible for the fed to reduce its balance sheet.  There is no market for the bailout fraud paper they bought or over priced Treasuries.  

PT's picture

They don't need the whole building.  They only need the facade.  And it only has to look good from a distance.  Most people don't bother looking any closer.  Stop thinking it has to make sense.  At the end of the day it is all ones and zeroes and pieces of paper and they can make whatever rules they like.

This is one of my more ignorant posts so I won't complain if anyone attacks it.  I'd appreciate good comments showing me how wrong I am (or right).

Winston Churchill's picture

Calling it toxic sludge would be a compliment.

Muad'Grumps's picture

They are going to hike rates to 3% really fast then oh no! The economy is tanking. Then rates cuts to zero and helicopter money. 

Snaffew's picture

remember---the fed has raised twice in the last 17 months....they are expecting 3 more?  This will take the fed funds rate to 1.5 percent.  That is, if the fed does as expected---since when has that happened/  The fed is scared to hike rates---they can't service the debt now---there is almost nothing left in the coffers as it is and the debt ceiling approaches next week.

Hubbs's picture

Indeed. The very first thought that hit me when I read this. I would not be surprised if a few dozen zeros mysteriously get added to Belgium or Irish Central "clearing Banks" ledgers to allow them to secretly "buy" this crap on the FED's books.

The BS pile gets bigger and stinks worse with every passing day.

Hammer of Light's picture

Dead on target! Keep firing mate!

Snaffew's picture

I agree---this is merely fedspeak to hike the price of equities...just where is the money coming from when this country continues to expand its' debt load to the tune of $80 billion plus a month?

Ignorance is bliss's picture

The banking cabal has to move fast. Trump will be able to appoint 2 new Fed members this year and possibly 4 over the next two years. That's 4 out of 7. I'm not sure how those members will align, but my guess is that they will be biased in support of Trump's economic policies. If the cabal is all about crashing the U.S. debt market then their window may be closing.

Davidduke2000's picture

FAKE NEWS, all bullshit.

Bill of Rights's picture

Losers will talk anything to keep the Gold and Silver prices in check...

Hammer of Light's picture

Looks like they're going to kick off the reset now rather than later. Debt ceiling, bond market crash, market rigging, metals fixing ,LIBOR??? Goldman needs to be rounded up and terminated, all of them. KILL THE FEDERAL RESERVE (aka NOT a federal government entity) with extreme prejudice! These bankers are a disease upon humanity. There is no chance in hell the world can sustain these rate hikes. The derivatives implosion will happen around 3rd quarter from all this, none of this is real.

Silver is ripe for the plucking. I am totally out of all aspects of the markets now including cash. Time to drop 80 cents on the fiat of my holdings into physical metals fast while it's so damn cheap. Buy the dips boys and girls in metals.

brooklinite8's picture

QQ- What is the interest that we pay on the 20 Trillion dollars? Will that be rising in line with the fed interest rate hikes? 



sudzee's picture

Mr. Yellon could just as easily raise rates by just 10 bp rather than 25. Would give her some credibility and wouldn't look like shes poking Trump in the eye by pressuring the dollar higher and killing his vision.

Ned Zeppelin's picture

I'm actually thinking they realized they were on the wrong side of the trade and think it better to talk up the other side so they can avoid losses when interest rates don'tgo  up. 

gdpetti's picture

Pump and Dump... same as always, Fed policy of raising rates when the signs go bad, same as always, right on schedule per their NWO script... Gotta spread the chaos as much as possible before the big show with Mother Nature really begins.