Goldman Sachs president John Waldron says the Fed is making the right moves to tackle inflation - after saying the central bank had lost its credibility at the start of the year

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Goldman Sachs president John Waldron says the Fed is making the right moves to tackle inflation - after saying the central bank had lost its credibility at the start of the year
John Waldron Goldman SachsMike Blake/Reuters
  • Goldman Sachs President John Waldron is "impressed" with the Fed's swift interest rate hikes.
  • Waldron previously said the Fed lost credibility when inflation was surging but it wasn't raising rates.
  • "I think it's important to reset the price of money in the economy, which is something the Fed is very focused on," Waldron said.
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Goldman Sachs President John Waldron changed his tune on his assessment of the Federal Reserve and its recent monetary actions.

In an interview with Bloomberg on Tuesday, Waldron said he was "impressed" with the Fed's swift interest rate hikes, a reversal from his view earlier this year that Jerome Powell and the central bank had lost credibility in its ability to tame inflation.

"You're seeing the Fed move quite aggressively and in my opinion very appropriately to get on top of what's significant inflation building in the economy, clearly trying to front load a lot of the moves, policy moves, to try to deal with inflation," Waldron said.

The Fed started raising interest rates in March by 25 basis points. Since then it accelerated its rate hikes, raising rates by 50 and 75 basis points at its two most recent meetings. The Fed is expected to raise interest rates by another 75 basis points at its meeting later this month.

"We at Goldman Sachs are impressed with what they're doing, and we expect them to continue to be aggressive in fighting inflation, and I'd say so far, so good," Waldron said.

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Inflation has been raging, consistently hitting 40-year highs as a broad swath of commodities surged in the first half of the year. But since then, prices for commodities like oil, metals, and grains have fallen and there are early signs that inflation is about to show signs of cooling off.

Ultimately, Waldron sees the potential for the Fed to stick a soft landing if it can raise interest rates to the mid 3% range.

"Were we to end up at that place, we can see the economy resetting and being able to grow from here. I think it's important to reset the price of money in the economy, which is something the Fed is very focused on.

The effective Fed funds rate currently sits around 1.5%, and could jump above 2% by the end of this month depending on an upcoming interest rate decision.

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