Goldman Sachs sees heightened risk of US recession citing concerns the Fed will ‘respond strongly’ to high inflation – Bitcoin News


Goldman Sachs economists now see a heightened risk of a US 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 the increased risk of recession

Goldman Sachs economists, led by chief economist Jan Hatzius, explained in a note on Monday that the global investment bank has cut its growth forecasts for the US economy, warning that the risk of a recession is rising, Bloomberg reported.

Goldman Sachs economists wrote:

We now consider the risk of recession to be higher and more important.

“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 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 its biggest interest rate hike since 1994.

Goldman’s research team now sees a 30% chance that the US economy will enter a recession over the next year, up from 15% previously. In addition, the company sees a 25% conditional probability of a recession in the second year if it is avoided in the first. That implies a cumulative probability of 48% in the next two years compared to 35% before, the publication transmits.

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

“What would a recession look like?” Goldman economists continued. “Without major imbalances to resolve, a recession caused by moderate over-tightening would likely be shallow, though even the shallowest recessions have seen the unemployment rate rise by about 2.5 percentage points on average.”

They warned:

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

Earlier this month, Goldman Sachs Chairman and Chief Operating Officer John Waldron warned of unprecedented economic crises and tougher times ahead. In May, Senior Chairman and former CEO Lloyd Blankfein advised businesses and consumers to prepare for a US recession.

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

kevin helms

Kevin, an Austrian economics student, found 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 intersection between economics and cryptography.

image credits: Shutterstock, Pixabay, Wiki Commons, lev radin

DisclaimerNote: 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 product, service, or company. 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.


Source link

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *