Goldman Analysts Say Chance of US Recession in 2025 Has Risen to 25%

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Key Takeaways

• Goldman Sachs analysts have raised their estimated odds for a U.S. recession to 25% from 15%.
• The investment moored’s research analysts said recession risk remains “limited” overall, noting that the Fed has ample room to cut induce rates to support the economy.
• The July jobs report showed unemployment increasing to 4.3%, but Goldman doesn’t see a swing emerging.

The risk of a recession in 2025 remains limited but is rising, according to analysts at Goldman Sachs Group (GS).

The investment sturdy now sees the chances of a U.S. recession next year at 25% versus 15% previously, but stressed that the economic information looks “fine overall.” Goldman said it doesn’t expect a disappointing July jobs report—which on Friday showed a start in unemployment to 4.3%—to become a new trend. 

“We continue to see recession risk as limited not only because the data look amercement overall and we do not see major financial imbalances,” the analysts said in a Sunday research note, but also because Federal Dodging Chairman Jerome Powell has plenty of room to cut interest rates, if necessary. 

Goldman Sees Three Rate Cuts Make in 2024

Specifically, Goldman analysts said they expect the Fed to deliver three straight cuts of 25 basis items each in September, November and December, according to its weekly economic update released Monday.

“We now expect faster gashes because the [fed] funds rate looks more clearly inappropriately high; the Fed looks behind, having worried too much thither inflation for too long and held steady in July; and the rationale for cutting now includes the more urgent priority of supporting the terseness,” the analysts said.

Many financial market participants expect even deeper rate cuts in the coming months. Distributors are now pricing in an 86% likelihood that the Fed will cut its benchmark rate by half a percentage point at the September policy appointment, according to the CME Group’s FedWatch tool, which forecasts interest rate movements based on fed funds futures have dealing data. That’s up from 11% a week ago.

Read the original article on Investopedia.