Goldman Sachs now thinks the Fed will hike rates four times in 2022 and start slashing its balance sheet in July

The Fed is going to raise rates in 2022.

Samuel Corum is a photographer.

The Federal Reserve will raise interest rates four times in the next five years, according to Goldman.

The Wall Street giant said in a note that it believes the Fed will start selling assets in July. The central bank has almost $9 trillion worth of bonds.

The rate hikes and balance-sheet reductions could cause more volatility in the stock market. The securities would look more attractive to investors if yields went up.

As investors prepare for the US central bank to dial back its support for the economy and financial markets, stocks have fallen this year.

Goldman said that recent positive economic data was likely to intensify Fed officials' concerns about inflation, which is running at a 39-year high.

The unemployment rate dropped to 3.9% in December from 4.2%, even though the jobs-added figure came in lower than expected.

Jan Hatzius, the bank's chief economist, wrote in the note that the US labor market continues to make rapid progress. Wage inflation points to labor scarcity.

Goldman thinks the Fed will raise interest rates in March, June, and September, and it has now added in December this year, as policymakers try to stamp out price rises.

The bank believes that the Fed will raise the federal funds rate between 2.5% and 2.75% in the years to come, which is more aggressive than most investors think.

Here's what major Wall Street firms are forecasting about the timing and direction of the Fed's first rate hike since the swine flu began, and what it means for your investing.

Goldman's analysts have updated their view on when the Fed is likely to start trimming its balance sheet. The process is now expected to start in July or earlier than previously thought.

The Fed has almost $9 trillion of assets and is currently spending money from maturing securities. It bought more than $100 billion of bonds and other securities every month in an effort to encourage borrowing and calm the markets during the coronaviruses crisis.

The minutes from the Fed's December meeting show that it could be appropriate to begin to reduce the balance sheet relatively soon after the first rate hike.

Bond yields have risen in recent days due to expectations that the Fed could soon start selling assets.

The yield on the key 10-year US Treasury note has risen from around 1.49% at the start of the year to above 1.77% as of Monday, taking it close to its highest level since early 2020.

Business Insider has an original article.