- The Fed won't cut rates for another couple years, according to Goldman Sachs' chief economist.
- In his view, inflation will remain high next year, and the Fed is unlikely to stray from aggressive policy.
- "I think they would be very resistant to rate cuts," Jan Hatzius told Bloomberg.
The Federal Reserve is unlikely to cut interest rates unless a recession hits the US economy, according to Goldman Sachs' chief economist, Jan Hatzius.
In his view, policymakers are unlikely to stray from their current hawkish path. Hatzius disagrees that the market should be pricing in significant rate cuts at this time.
"I think that it certainly could happen and would happen if we went into recession," Hatzius told Bloomberg Tuesday. "But I think in a small-growth environment when the Fed is trying to squeeze inflation lower, I think they would be very resistant to rate cuts. So I think those cuts are probably somewhat excessive from a market pricing perspective."
Meanwhile, JPMorgan expects the Fed to raise rates by 75 basis points in September before pivoting to a more dovish approach. In a Monday note, analysts explained that the economy will see just one more outsized rate hike in 2022 as inflation continues to cool off.
Then, they explained, Chair Powell will be more flexible with future moves and effectively pivot from the hawkishness of the last few months.
Still, Hatzius noted that he expects prices will remain elevated by this time in 2023.
"I think it could be a couple years [before the Fed cuts rates]," he said. "I think while inflation will look a lot better a year from now, I think it will still be significantly above the target and ultimately they do want to get it back down to pretty close to 2%."