Jan Hatzius told CNBC on Tuesday that the pace of wage increases in the United States must slow as inflation picks up, becoming a key focus for the Fed and markets alike.
The quarterly annualized wage growth rate has been "well above" 4% over the past two quarters, said Hatzius, who is also head of global investment research at Goldman Sachs.
it has to go down,” added Hatzius. Goldman Sachs' chief economist said it would be difficult to sustain wage increases of 5% to 6% without causing "significantly high" inflation.
Jan Hatzius told CNBC on Tuesday that as inflation rises, the pace of US wage increases must slow and become a key focus for the Fed and markets alike.
“I think 4% is fine. 5% to 6% is probably difficult to sustain without significantly higher inflation, so it needs to be brought down,” Hatzius added.
The annualized quarter-over-quarter wage growth rate was "well above" 4%, said Hatzius, who is also head of global investment research at Goldman Sachs.
I'll probably have to slow down a bit," he told CNBC's "Squawk Box Asia." January.
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Earlier this month, Goldman Sachs CEO David Solomon said “there is real wage inflation everywhere”.
Compensation costs at Goldman rose 33% to $17.7 billion for 2021, a whopping $4.4 billion increase driven primarily by performance pay increases, executives said.
Meanwhile, inflation is picking up and the US consumer price index rose 7% in December, the fastest rate since June 1982.
These higher consumer prices are weighing on wage increases for workers despite their pay rises.
In fact, the average worker has taken a 2.4% pay cut over the past year, according to seasonally adjusted data released by the Labor Department.
The top six U.S. banks -- JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley, and Goldman Sachs.
Since raised some salaries in 2021 and then raised spending forecasts for next year, according to a Reuters report.
However, Hatzius is optimistic about falling wage inflation about their salary expectations.
That some of these recent salary increases are more like one-off, one-time retention bonuses and things that won't necessarily be repeated," he said.
"But I think that's an important thing to look at. Economists expect inflation concerns to prompt the Fed to tighten monetary policy this year to counter rising prices.
In December, the majority of the monetary policy committee forecast three rate hikes this year, but Goldman forecast that the Fed will hike rates four times in 2022.
"Inflation is pretty political right now," Hatzius added. Consider the strong desire to reduce inflation on both sides of the political aisle.