Goldman Sachs economists on Thursday said the firm remained "comfortable" with its call for five more interest rate hikes — two more than priced in financial markets — through the end of 2019.

In a note to clients, Goldman said it feels the Federal Reserve needs to generate a significant tightening in financial conditions to slow the economy to its potential growth pace sooner rather than later, and "that this will require delivering significantly more hikes than priced in the curve." 

Meanwhile, the Fed should continue with its gradual rate hikes but must be prepared to slow the tightening if U.S. productivity breaks out of a several-year lull, as it may be poised to do, an influential Fed governor said on Thursday.

Randal Quarles, who rarely discusses monetary policy, painted a somewhat more optimistic picture than his colleagues on the economy’s longer-term capacity, and said he favored a bit more dovish path than most others at the U.S. central bank.

“Absolutely, my path for policy is more gradual” than most other Fed policymakers, said Quarles, the central bank’s vice chair for supervision and point person on regulating banks.

For now, because it remained hard to tell where the currently strong economy would settle in the years ahead, the Fed should continue with its “stable, gradual, and predictable” approach of about one rate hike per quarter, he said.

The Fed should “follow that course through the temporarily shifting and sometimes conflicting signs from the economy unless some strong and steady signal requires a firm but moderate correction,” he told the Economic Club of New York.

The comments from Quarles, an appointee of U.S. President Donald Trump, reinforced expectations for tightening into next year. But they also pushed back on worries that a hot labor market would soon spark inflation and a more aggressive Fed response, which could truncate the near-record long economic expansion.

Unusually for a U.S. president, Trump himself has ramped up criticism of the Fed’s rate hikes, calling them “crazy” and warning they would hurt the economy.

The comments from Quarles, an appointee of U.S. President Donald Trump, reinforced expectations for tightening into next year. But they also pushed back on worries that a hot labor market would soon spark inflation and a more aggressive Fed response, which could truncate the near-record long economic expansion.

Unusually for a U.S. president, Trump himself has ramped up criticism of the Fed’s rate hikes, calling them “crazy” and warning they would hurt the economy.