Goldman economist states that maintaining wage growth of 5% to 6% is challenging without significant inflation.

• On Tuesday, Jan Hatzius stated on CNBC that the rate of wage growth in the U.S. must decrease, as inflation rises and becomes a key concern for the Fed and markets.
• According to Hatzius, Goldman Sachs' head of global investment research, the quarter-on-quarter annualized growth rate of wages over the past few quarters has been "significantly higher" than 4%.
• Hatzius stated that 4% is acceptable, but 5% to 6% may be challenging to maintain without significantly increasing inflation, which would require a reduction.

Goldman Sachs' chief economist stated that maintaining wage growth of 5% to 6% would be challenging without resulting in "significant" inflation.

On Tuesday, Jan Hatzius stated on CNBC that the rate of wage growth in the U.S. must decrease, as inflation rises and becomes a key concern for the Fed and markets.

Hatzius stated that 4% is acceptable, but 5% to 6% may be challenging to maintain without significantly increasing inflation, which would require a reduction.

According to Hatzius, Goldman Sachs' head of global investment research, the quarter-on-quarter annualized growth rate of wages has been "significantly higher" than 4%.

He stated on CNBC's "Squawk Box Asia" that the recent wage growth pace may need to slow down a bit.

The U.S. Labor Department reported in early January that the average pay in the U.S. increased by more than $31 an hour in 2021, representing a 4.7% annual rise.

In a statement earlier this month, CEO David Solomon announced that "wage inflation is occurring everywhere." Goldman's compensation costs increased by 33% to $17.7 billion in 2021, with a significant portion of the increase attributed to pay raises for good performance, according to executives.

The U.S. consumer price index increased by 7% in December, marking the fastest rate of inflation since June 1982.

Despite their pay raises, workers' purchasing power was reduced due to the rise in consumer prices, resulting in an effective 2.4% pay cut last year, according to seasonally adjusted data from the Labor Department.

According to a Reuters report, the six largest banks in the United States, which include JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley, and Goldman Sachs, made wage increases in 2021 and subsequently raised their expense projections for the upcoming year.

Hatzius, however, is optimistic on wage inflation coming down.

There are reasons to believe that recent wage increases may not be sustainable because they are one-off retention bonuses and not necessarily repeatable, according to a survey of businesses. It is important to watch this development.

This year, the Fed is predicted by economists to tighten monetary policy due to inflation concerns, in an effort to control rising prices.

In 2022, Goldman predicts that the Fed will hike interest rates four times, while a majority of the monetary policy committee forecasts only three hikes.

At present, inflation is a highly political issue, with both sides of the political spectrum expressing a strong desire to reduce it.

— CNBC’s Greg Iacurci contributed to this report.