US Markets

Hatzius: Feds will raise rates 1 time each quarter

2016 likely driven by consumer spending: Hatzius

With investors still uncertain about how the Federal Reserve's tightening of monetary policy will affect the economy, Goldman Sachs' top economist expects the central bank to take a slow approach—and for the status quo on growth to prevail.

The Fed is currently expected to raise interest rates at a relatively modest pace, so as not to upset major asset markets like housing and bonds. "Going by about half as quickly as you've gone in past cycles, to me that seems pretty gradual," Hatzius told CNBC's "Closing Bell."

In that vein, Hatzius thinks that the Fed will raise interest rates " a quarter point every quarter," he said. Under that scenario, "the economy does more or less what it has been doing in terms of growth," he told

Hatzius forecasts that domestic demands and consumer spending will likely be the main drivers of the economy in 2016.

Growth expectations have been disappointing in the past years, Hatzius notes,but the labor market has improved more than expected. Still, he said that when looking at advanced economies in general, U.S. labor markets have improved a lot. In October, the world's largest economy added 271,000 jobs, with the unemployment rate dropping to 5 percent.

So far this year, the economy has added an average of more than 200,000 new positions per month.

The job growth may help grease the wheels of consumer spending next year, Hatzius suggested — although not as quickly as in 2015. "2015 was a great year for consumer spending," due to the better labor market, and the big drop in energy prices, the economist said.

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Hatzius predicts that there will be some acceleration in the inflation. Goldman Sachs is considering that the inflation will rise from 1.3 percent to 1.6 percent, a rate still well below the Fed's target of 2 percent.

Goldman Sachs expects easing from the European Central Bank (ECB) this week, and considers that there will be further divergence in the weeks ahead between the U.S.interest rates and the European economy. That will help boost the dollar against the euro, he added.

"The Gap between short-term rates and the U.S. and Europe is going to go up, and I think that is going to mean upward pressure on the dollar," he told "Closing Bell."