Goldman Sachs says: 'We now see recession risk as higher and more front-load. inflation
Goldman Sachs Sees Higher US Recession Risk Citing Concerns the Fed Will 'Respond Forcefully' to High Inflation
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 forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply,” they explained.Goldman Sachs’ economists, led by chief economist Jan Hatzius, explained in a note Monday that the global investment bank has cut its growth forecasts for the U.S.
The Goldman research team now sees a 30% probability of the U.S. economy entering a recession over the next year, up from 15% previously. In addition, the firm sees a 25% conditional probability of a recession in the second year if one is avoided in the first. That implies a 48% cumulative probability in the next two years versus 35% previously, the publication conveyed.
“What might a recession look like?” the Goldman economists continued. “With no major imbalances to unwind, a recession caused by moderate overtightening would most likely be shallow, though even shallower recessions have seen the unemployment rate rise by about 2.5 percentage points on average.”One additional concern this time is that the fiscal and monetary policy response might be more limited than usual.