Goldman Sachs sees higher risk of recession in US, stating concern that Fed will ‘strongly respond’ to high inflation – Economy Bitcoin news

Goldman Sachs sees higher risk of recession in US, stating concern that Fed will ‘strongly respond’ to high inflation – Economy Bitcoin news

Goldman Sachs economists now see an increased risk of a U.S. recession. “We are increasingly concerned that the Fed will feel compelled to respond strongly to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply,” they explained.

Goldman Sachs on increased risk of recession

Goldman Sachs economists, led by chief economist Jan Hatzius, explained in a note Monday that the global investment bank had lowered its growth forecasts for the U.S. economy, warning that the risk of a recession was rising, Bloomberg reported.

Goldman Sachs economists wrote:

We now see the risk of recession as greater and greater progress.

“The main reasons are that our basic growth path is now lower,” they added. “We are increasingly concerned that the Fed will feel compelled to respond strongly to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply. Last week, the Federal Reserve approved the largest increase in interest rates since 1994.

Goldman’s research team now sees a 30% chance that the U.S. economy will enter a recession next year, up from 15% earlier. In addition, the firm sees a 25% conditional probability of a recession in the second year if it is avoided in the first. This implies a cumulative probability of 48% in the next two years compared to 35% earlier, the publication reported.

In April, Hatzius said clients that the firm has estimated “the prospects for a recession at approximately 15% over the next 12 months and 35% over the next 24 months”.

“What could a recession look like?” Goldman economists continued. “Without major imbalances to ease, a recession caused by moderate over-tightening would most likely be shallow, although even a shallow recession has led to an increase in the unemployment rate by about 2.5 percentage points on average.”

They warned:

An additional concern this time around is that the fiscal and monetary policy response could be more limited than usual.

Earlier this month, Goldman Sachs president and CEO John Waldron warned unprecedented economic shocks and difficult times ahead. In May, senior president and former CEO Lloyd Blankfein Advised companies and consumers to prepare for a recession in the United States.

What do you think of the Goldman Sachs warning? Let us know in the comments section below.

Goldman Sachs sees higher risk of recession in US, stating concern that Fed will ‘strongly respond’ to high inflation – Economy Bitcoin news

Kevin Helms

A student of Austrian economics, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in the security of Bitcoin, open source systems, network effects and the crossroads between economics and cryptography.




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