Goldman Sachs Sees Higher US Recession Risk Citing Concerns the Fed Will ‘Respond Forcefully’ to High 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 on Increased Risk of Recession

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. economy, warning that the risk of a recession is rising, Bloomberg reported.

The Goldman Sachs economists wrote: We now see recession risk as higher and more front-load.

“The main reasons are that our baseline growth path is now lower,” they added. “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.” Last week, the Federal Reserve approved its biggest interest-rate hike since 1994.

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.

In April, Hatzius told clients that the firm estimated “the odds of a recession as roughly 15% in the next 12 months and 35% within the next 24 months.”

“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.”

They cautioned: One additional concern this time is that the fiscal and monetary policy response might be more limited than usual.

Early this month, Goldman Sachs President and COO John Waldron warned of unprecedented economic shocks and tougher times ahead. In May, Senior Chairman and former CEO Lloyd Blankfein advised companies and consumers to prepare for a U.S. recession. Tags in this story Goldman Sachs, Goldman Sachs economic forecast, Goldman Sachs economy, Goldman Sachs predictions, Goldman Sachs recession, Goldman Sachs warnings

What do you think about Goldman Sachs’ warning? Let us know in the comments section below. Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography. Russian Ruble Taps 7-Year High Against the US Dollar — Economist Says "Don’t Ignore the Exchange Rate" ECONOMICS | 15 hours ago Deutsche Bank Expects Sooner, More Severe US Recession as the Fed Takes "Aggressive Hiking Path" ECONOMICS | 1 day ago

Image Credits: Shutterstock, Pixabay, Wiki Commons, lev radin Previous articleElon Musk Discusses Crypto Investing, Dogecoin Support, ‘Unresolved’ Twitter Issues, and Near-Term Recession Next articlePlan B’s Stock-to-Flow Price Model Denounced by Vitalik Buterin, Says Model Can Be ‘Harmful’ Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimerShow comments More Popular NewsIn Case You Missed ItFollowing a Brief Fee Spike, Gas Prices to Move Ethereum Drop 76% in 12 Days

Transaction fees on the Ethereum network are dropping again after average fees saw a brief spike on April 5 jumping to $43 per transfer. 12 days later, average ether fees are close to dropping below $10 per transaction and median-sized ... read more.UAE Airliner Emirates to Launch NFTs and Experiences in the Metaverse Survey: Adoption in Argentina Grows, With 12 out of 100 Adults Having Invested in Crypto Ethereum Foundation"s Financial Report Discloses It Holds $1.6 Billion in Assets, 80.5% Held in Ether Terra"s Algorithmic Dollar-Pegged Crypto UST Is Now the Third-Largest Stablecoin