Economists at Goldman Sachs now see an increasing risk of a U.S. recession. “We are increasingly concerned that if energy prices rise further, the Fed will have to respond strongly to high headline inflation and consumer inflation expectations, even if activity slows sharply,” they explained.
Goldman Sachs on increased recession risk
According to Bloomberg, Goldman Sachs economists led by chief economist Jan Hatzius explained in a note Monday that the global investment bank has lowered its growth forecast for the U.S. economy and warned that the risk of a recession is rising .
Goldman Sachs economists wrote:
We now see recession risk as a higher and more upfront burden.
“The main reason is that our baseline growth path is now lower,” they added. “We are increasingly concerned that if energy prices rise further, even if economic activity slows sharply, the Fed will have to respond forcefully to high headline inflation and consumer inflation expectations.” an interest rate hike.
Goldman’s research team now sees a 30 percent chance that the U.S. economy will enter a recession next year, up from 15 percent previously. Furthermore, if a recession is avoided in the first year, the company sees a 25% conditional probability of a recession in the second year. That translates to a cumulative probability of 48 percent over the next two years, compared with 35 percent previously, the publication said.
Hatzus in April Tell The firm estimates “about a 15% chance of a recession in the next 12 months and a 35% chance of a recession in the next 24 months.”
“What would a recession look like?” the Goldman economist continued. “Without major imbalances to ease, a recession caused by moderately excessive tightening is likely to be shallow, although even a shallow recession would increase unemployment by about 2.5 percentage points on average.”
Another concern this time around is that the fiscal and monetary policy response may be more limited than usual.
Earlier this month, Goldman Sachs President and COO John Waldron warn Unprecedented economic shocks and difficult times ahead. In May, senior chairman and former CEO Lloyd Blankfein Suggest Companies and consumers prepare for a U.S. recession.
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