Goldman Sachs Says U.S. Can Still Avoid a Recession

Posted on September 5th, 2022.

According to Goldman Sachs, a soft landing is still possible despite ongoing recession fears and interest rate hikes by the Fed.

The "are we or aren't we" of recession chatter has overtaken much of the economic narrative over the past few months.

With inflation still at record highs and the housing market taking a downward turn, optimistic outlooks have been few and far between — until now.

A note from Goldman Sachs chief economist Jan Hatzius and his team of analysts said on Monday that there are "encouraging signs" for a "soft landing," Markets Insider reported. A soft landing implies the Fed can successfully tame inflation without triggering economic collapse.

Since March, the Fed has raised interest rates by 2.25 percentage points, marking the largest hike in nearly 40 years. Although aggressive moves to tame inflation like this have historically led to a subsequent recession, Goldman stated on Monday that it's seeing more positive economic signs.

Falling energy prices mean relief for individuals who were straining to make ends meet. Additionally, because more people joined the workforce in July, there could be signs of loosening wage pressures.

"Sharply lower commodity prices, a stronger dollar, and large improvements in supply-chain disruptions all suggest that goods price inflation will continue to abate," the analysts said, per Markets Insider.

Goldman predicts a 50 basis-point interest rate rise from the Fed in September, followed by two 25 basis-point moves in November and December.

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