The U.S. jobless rate, which was 4.1 percent in October, may reach 3.5 percent in late 2019, Goldman predicted. That would be the lowest level since the late-1960s.

“Our projections would imply an evolution over the current cycle from the weakest labor market in postwar U.S. history to one of the tightest,” the economists said in a summary of their report. “We expect that a tight labor market and a more normal inflation picture will lead the Fed to deliver four hikes next year.”

That’s one more rate increase than the median forecast of Fed officials, and more than financial markets are currently pricing in. One of the reasons why Goldman Sachs economists said they disagree with market expectations is “we see little evidence that soft inflation is structural in nature.”

Eoin Treacy's view

The USA’s economic expansion might be modest by historical standards but it is still one of the longest in history. The prospect of adding a fiscal stimulus when growth is already mature and unemployment low is the epitome of procyclical policy and increases the likelihood that inflation will increase.

This represents a challenge for the Federal reserve which next year will have some substantial personnel changes. Generally speaking the market seeks to test new Fed governors. There is a substantial quantity of corporate debt needs to be refinanced next year while the Fed is simultaneously starting to reduce the size of its balance sheet.

The yield curve continues to flatten with 2-year yields trending higher faster than the 10-year as expectations for further rates hikes are gradually priced in. If it inverts sometime next year we can expect a vigorous debate to erupt about the efficacy of its predicative power with regard to recessions.