Goldman Sachs economists estimate that the US economy is still on a “narrow path” for a gentle landing, as improving inflation and other factors suggest that the Federal Reserve may be able to complete the aggressive plan to raise interest rates. without leading the country into recession.
In particular, according to Bloomberg, analysts at the bank led by Goldman chief economist Jan Hatzius, said that although there are some signs of easing in the labor market, structural inflation seems to be slowing down as pressure on the supply chain subsides.
As they point out, the improvement in inflation figures, along with some adjustments in the labor market, have reduced the risk of forcing the Fed to proceed with such a monetary tightening that it will lead to a recession in the coming years.
Although the “deterioration” of indicators such as first-quarter GDP “show that the short-term risk of recession has technically increased”, other economic activity measures “suggest that production continues to grow”, Goldman analysts wrote in a note yesterday.
According to many economists, the strong labor market and the cash surplus of households have removed the prospect of a recession in the near future. However, all eyes are on the pace at which the Fed will raise interest rates and whether it can strike a balance that will help the economy avoid a recession.
For their part, Goldman economists said they do not change their forecast for an overall increase in bank interest rates in the region of 3 – 3.25% and reiterated that they expect increases of 50 basis points in the next two meetings of the Fed. For September, they said it was still marginal to say between an increase of 25 or 50 basis points.
“In the short term, there is little incentive for Fed officials to deviate from the relatively aggressive context of recent months,” they said in a statement.
Source: Capital

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