Goldman Sachs: Downgrading the probability of a U.S. recession to 15%, the Federal Reserve may not need to raise interest rates further

Goldman Sachs currently sees a 15% chance of a U.S. recession, down from 20% previously, as inflation cools and the labor market remains resilient, suggestingThe Federal Reserve may not need to raise interest rates further。

Goldman Sachs Chief Economist Jan Hatzius said in a research note:

"First, real disposable income looks set to pick up again in 2024, against the backdrop of continued steady employment growth and rising real wages. Second, we remain strongly opposed to the idea that the'long, variable and lagging 'drag of monetary policy will push the economy into recession."

He believes that...The drag on the economy from tightening will continue to weaken, "completely disappearing by early 2024"。

Mr. Hatzius's 15 per cent probability of a US recession is well below the 60 per cent consensus forecast. Goldman Sachs is also more bullish than its peers on US growth, predicting average growth of 2 per cent by the end of 2024. Mr. Hatzius saidThe Federal Reserve's interest rate hike in September is "off the table", and the obstacles to a rate hike in November are "very large"。

"Overall, our confidence that the Fed is ending its rate hikes has strengthened over the past month," he said, adding that rising unemployment, slower wage growth and falling core prices should help Fed members stay put.

"Even so,Federal Reserve officials are unlikely to move quickly to ease policyUnless economic growth slows more than we expect in the coming quarters ", Hatzius added." Therefore, we expect to cut rates only very slowly by 25 basis points per quarter starting in the second quarter of 2024 ".

beforeIndustrial foreign exchangeEconomists at the US Federal Reserve have scrapped their forecasts for a US recession, becoming the first major Wall Street bank to officially change its forecasts amid growing optimism about the economic outlook. Earlier Federal Reserve Chairperson Jerome Powell also told reporters that Fed economists are no longer predicting a recession. In addition to upward revisions to forecasts for US GDP growth in 2023 and 2024, Bank of America economists also changed their expectations for when and how the Fed will cut interest rates. Economists at the bank now expect rate cuts to begin later than June 2024 and at a slower pace.