Goldman Sachs estimates the US economy has a 30% chance of tipping into recession over the next year, down from 15% previously, amid record inflation and macroeconomic weakness fueled by the invasion of the Ukraine by Russia.
The latest forecast comes about a week after the U.S. Federal Reserve made its biggest rate hike since 1994 to stem soaring inflation and several other central banks also took aggressive steps to tighten policy. monetary. Goldman Sachs also lowered its below-consensus US GDP estimate for the next two years to reflect the drag on the economy.
“The Fed has priced in rate hikes more aggressively, final rate expectations have risen and financial conditions have tightened further, which now implies a significantly bigger drag on growth – a little more than what we think necessary,” Goldman economists said in an end-of-day note Monday.
Goldman Sachs projected a conditional 25% probability that the US would enter a recession in 2024 if it avoided one in 2023, adding that this meant there was a 48% cumulative probability of a recession over the two coming years, compared to its previous forecast of 35%.
“We are increasingly concerned that the Fed will feel compelled to react forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slowed sharply,” the report added.