In A Retrospective on “10 Questions for 2021,” Goldman Sachs took a look back at what it predicted at the end of last year, and what actually happened. The majority of the predictions were spot-on. For instance, analysts wrote that a third wave of COVID-19 wouldn’t cause GDP to fall again in Q1 of 2021, and full-year GDP growth would exceed consensus expectations.

But there was a major surprise to one of the firm’s expectations. 

Goldman predicted that core personal consumption expenditure (PCE) inflation would not exceed 2% at the end of the year. Instead, core PCE increased about 4.56% year over year, according to the report. “We expected inflation to bounce above 2% in the spring as we lapped the weakest pandemic base effects, but to come down in the second half of the year as consumption shifted back toward services and production problems diminished, relieving pressure on goods prices,” the firm noted. 

The supply and demand imbalances and “spillover effects” from the Delta variant abroad constraining production factored into a spike in durable goods inflation. In regard to core services, Goldman Sachs underestimated the acceleration in housing, food services, and accommodation prices “driven by pass-through from large wage gains while enhanced unemployment benefits were in place,” the report found. 

It was a red-hot housing market this year. Home prices appreciated at 19.9%, setting a 12-month record between August 2020 and August 2021. In comparison, the average rate of home price growth per year has been 4.6% since 1980, according to Fortune’s calculations. The housing inflation rate at the end of 2021 is approximately 3.7% year over year, according to Goldman Sachs’ report. The firm estimated in 2020 it would be about 2.1% year over year. In the spring, Goldman said it corrected prediction errors by “calling for a sharp and persistent increase in shelter inflation and a pickup in categories that depend on low-paid labor.”

The U.S. Federal Reserve also started tapering earlier than Goldman expected. To combat sky-high inflation, the Fed Chair Jerome Powell said on Dec. 15 the agency is accelerating the end of its bond asset-buying program. It’s now on track to conclude in early 2022. Powell also signaled the Fed favors raising interest rates next year. 

As for what comes next? Goldman writes that 2022 will be a year of moderation. And by the end of 2022, both growth and inflation will come down sharply. “But we think inflation is likely to remain high for a while, high enough for the [Federal Open Market Committee] FOMC to deliver three rate hikes and begin balance sheet runoff next year,” the firm noted.