Goldman Sachs cuts US recession odds to 15% as economic optimism grows

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Goldman Sachs is increasingly confident that the US economy will stick the soft landing that many thought was nearly impossible to pull off.

In a research report published Monday night, Goldman Sachs lowered its estimated chance of a US recession over the next 12 months to just 15%.

That’s basically in-line with the historical average chance of a recession on any given year. It’s also down from the Wall Street bank’s prior forecast of 20% and well below its 35% projection in March as the banking crisis erupted.

The report, titled β€œSoft Landing Summer,” pointed to a series of encouraging economic indicators on inflation and the jobs market that suggest the US economy will avoid the Federal Reserve-fueled recession that many feared.

Tamping down inflation without throwing the economy into recession is what’s called a β€œsoft landing,” something the Fed has only achieved once in the past 60 years.

β€œWe strongly disagree with the notion that a growing drag from the β€˜long and variable lags’ of monetary policy will push the economy toward recession,” Jan Hatzius, Goldman’s chief US economist, wrote in the report.

β€œIn fact, we think the drag from monetary policy tightening will continue to diminish before vanishing entirely by early 2024.”

Hatzius added that Goldman Sachs is increasingly confident that the Fed is β€œdone” raising interest rates as unemployment rises, wages slow and inflation eases. Source: CNN

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