Three decade high inflation print will force US Fed’s hand, warns Goldman Sachs

President Biden Announces His Nominees For Federal Reserve Chair And Vice Chair
WASHINGTON, DC - NOVEMBER 22: Federal Reserve Board Chair Jerome Powell (L) walks to the podium to give his remarks as President Joe Biden (R) looks on during an announcement at the South Court Auditorium of Eisenhower Executive Office Building on November 22, 2021 in Washington, DC. President Biden is nominating Powell to be the Chair of Board of Governors of the Federal Reserve System for a second term and Lael Brainard, an incumbent member of the Board of Governors, to be the next Vice Chair. (Photo by Alex Wong/Getty Images)

The US Federal Reserve will have to tighten policy much quicker than they want in order to hose-down runaway inflation, a leading Wall Street investment bank said yesterday.

Goldman Sachs has bet on the Fed having to double the speed of scaling back its monthly asset purchases from January next year to and hiking interest rates from nearly zero in May.

Two further rate hikes would happen next year, and then another two in 2023.

If the world’s most influential central bank were to taper at a rate of $30bn, then its pandemic-era bond buying programme would end in March.

The forecast has been sparked by inflation – which is running at the highest print since 1990 – letting rip across the US economy.

Fed chair Jerome Powell announced earlier this month the central bank would start to wind down its bond purchases by $15bn a month.