The Marriner S. Eccles Federal Reserve Board Building in Washington, D.C., U.S., on Friday, Jan. 7, 2022. The House and Senate will both be in session next week for the first time in 2022, and Democratic leaders in both chambers are searching for a path forward on voting rights legislation. Photographer: Ting Shen/Bloomberg 
In its December meeting minutes, Fed officials signaled they are preparing to move quicker than the last time they tightened monetary policy in a bid to keep the U.S. economy from overheating amid high inflation and near-full employment. These conditions -- along with a larger balance sheet that’s suppressing longer-term borrowing costs -- “could warrant a potentially faster pace of policy rate normalization,” the minutes said.
Officials also saw the timing of reducing the $8.8 trillion balance sheet as likely “closer to that of policy-rate liftoff than in the committee’s previous experience,” according to the minutes.
The U.S. unemployment rate fell below 4% and wages jumped last month, adding to evidence of a tight labor market.
Goldman’s forecast for the terminal funds rate in unchanged at 2.5%-2.75%.
“Even with four hikes, our path for the funds rate is only modestly above market pricing for 2022, but the gap grows significantly in subsequent years,” Hatzius wrote.