Bloomberg News reports that Goldman Sachs lowered the probability of a US recession starting in the next year on Tuesday. The same might have happened in the next year, escalating to 15% from a previous forecast of 20%.
What was the reason for the forecast being cut?
Data from the labor market and consistent positive inflation were the reason for the cut. As written in his note, the Chief Economist of Goldman Sachs, Jan Hatzius, stated the same. The investment bank revealed that it expects reacceleration in the real disposable income next year. It is due to the continued solid job growth and escalating wages.
Tightening monetary policy caused the drag which will continue and reduce before the beginning of 2024 entirely wipes off it.
What was the scenario of US consumption spending?
US consumer spending had picked up pace in July. However, slowing inflation made the expectations stronger that the Federal Reserve would cause the interest rates to stay unchanged in the policy meeting scheduled to be held in the current month.
Goldman Sachs said that Jerome Powell, the Fed Chair, would proceed with utmost care and that approach the signal that a hike in September is off the table and that there is a significant hike that might work as a hurdle for November.
Bloomberg News reports that Goldman Sachs also added that it is anticipating a gradual cut of at least 25 basis points every quarter, which starts in the second quarter of 2024.
