Goldman Sachs economist Jan Hatzius has cut the chances of a US recession to 20% from 25% previously.
"The probability of a U.S. recession has fallen further as both recent data and ongoing fundamentals point to rapid — and mostly painless — disinflation from here," he writes. "One reason why we expect most DM economies to achieve a soft landing is that many EM economies have already done so, despite more difficult starting positions in terms of the size of the energy hit and/or the stability of inflation expectations."
Back in March, Goldman boosted the odds of a recession to 35% and said the Fed wouldn't hike rates at the March 22 meeting. Ultimately, they did hike rates and the bank crisis quickly faded.
In June, they lowered the odds to 25%, saying:
- “We have become more confident in our baseline estimate that the banking stress will subtract only a modest 0.4 percentage points from real GDP growth this year, as regional bank stock prices have stabilized, deposit outflows have slowed, lending volumes have held up, and lending surveys point to only limited tightening ahead”
- “the tail risk of a disruptive debt ceiling fight has disappeared”
They expect a 25 bps hike at the July FOMC with a peak in the range of 5.25-5.50% with a long pause for a year and then gradual cuts.
