by Calculated Risk on 11/20/2015 08:37:00 PM

A few excerpts from a research piece by Goldman Sachs economists Zach Pandl and Jan Hatzius:

The US economy in 2016 is likely to be driven once again by domestic demand—particularly consumer spending. We forecast that GDP will increase by 2.25% Q4/Q4 next year, in line with our latest estimates for 2015. ... Both narrow and broad measures of unemployment have fallen significantly ...

The Federal Reserve looks likely to begin raising short-term interest rates next month, seven years after cutting them to zero. ... Based on our economic forecasts, we currently expect the committee to raise the funds rate by 100bp next year, or one hike per quarter—a fair amount above the 55-60bp pace priced into the bond market. Admittedly, we see the risks to this forecasts as skewed to the downside at the moment. The pace of rate hikes will depend on progress toward the FOMC’s employment and inflation goals, as well as evolving views on the level of equilibrium interest rates.