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.