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Goldman Says Growth Is Bigger Fed-Hike Factor Than Market Thinks

Bloomberg business news
Four hikes are on the cards in 2018 "with the economy "roaring more quickly than it has," Hatzius said on Dec. 14.Source: Bloomberg

Investors have been underestimating the importance of U.S. economic growth for Federal Reserve policy, and giving too much relative emphasis to inflation and wage data that have tended to disappoint expectations, according to Goldman Sachs Group Inc.

If it starts looking more likely that U.S. growth will stay above its potential rate, that could boost the chances of a labor-market overheating that quickens the pace of Fed rate increases, Goldman economists led by Jan Hatzius wrote in a Dec. 17 note.