Goldman Sachs Group has revised its estimates on the possibility of a recession in the US in the next 12 months, lowering the probability to 25%, thanks to the easing of stress in the banking sector and the bipartisan agreement to suspend the national debt ceiling.
By March, that probability had risen to 35%, following the collapse of Silicon Valley Bank.
According to Jan Hatzius, chief economist at Goldman, the situation has improved as “regional bank share prices have stabilized, swings in deposits have narrowed, lending volumes have held up and loan surveys indicate only modest tightening future”.
As for growth forecasts, Goldman expects an expansion of 1.8% in 2023, while the consensus of analysts polled by Bloomberg is 1.1%.
Goldman economists expect the Fed to hike rates another 25 basis points, most likely in July, to a top target range of 5.25% – 5.5%.
“After that, we anticipate a long hiatus of about a year, followed by very gradual cuts,” Hatzius wrote. “On a probability-weighted basis, we continue to believe the market is underestimating the 1-2 year rate outlook.”