Goldman Sachs is growing increasingly optimistic that the US economy will achieve the gentle landing that many said was practically impossible.
Goldman Sachs reduced its projection of a US recession over the next 12 months to 15% in a report.
That is about in line with the historical average probability of a recession in any given year. It is also lower than the Wall Street bank’s previous expectation of 20% and far lower than the 35% expected in March, when the banking crisis started.
Goldman Sachs cited a number of optimistic economic indications on inflation and the labor market that imply the US economy may avoid the Federal Reserve-fueled recession that many predicted.
The Fed has only managed a “soft landing” once in the last 60 years.
“We strongly disagree with the premise that an increasing drag from monetary policy’s “long and varied delays” will force the economy into recession,” Jan Hatzius, Goldman Sachs’ top US economist, wrote in the report.
“In fact, we believe the drag from monetary policy tightening will continue to reduce before disappearing totally by early 2024,” he added.
“Goldman Sachs believes the Fed is “done” hiking interest rates as unemployment climbs, wages stall, and inflation falls,” Hatzius wrote.
