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Goldman Sachs Chief Economist Jan Hatzius told Bloomberg on Tuesday that Federal Reserve Chairman Jerome Powell is not about to go all Volcker.
Some market participants believe Powell will give inflation-crushing interest-rate increase remarks at Jackson Hole on Friday.
However, speaking to Bloomberg Television, Hatzius explained that he believes Powell will “lay out a case, as he did in his last press conference, for slowing the pace of increases. We had two 75-basis-point moves. Our expectation would be, barring significant data surprises, that the September move is 50.”
Hatzius was quoted as saying he doesn’t believe “he will be specific about the number,” but that he will state “there is a risk of over-tightening, and therefore it makes sense to go a little bit more slowly than the outsized increases.”
Despite a fall on Monday, stocks have steadied somewhat on Tuesday.
Even so, Hatzius also doesn’t believe Powell will perform a complete u-turn and will “make clear that the job is not yet done,” with inflation still too high and the central bank having to perform a balancing act.
Hatzius said inflation will be much lower a year or two from now, although still substantially above target, and he anticipates a Fed funds rate of 3.5% or more to get there, as he believes “if you get to the mid-3s or maybe even a little bit higher, and then you stay there.”
