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Takeaways from the Key Takeaways
- Goldman Sachs economists have increased their forecast for Federal Reserve rate cuts this year to three and increased the likelihood of a U.S. Recession to 35%. President Donald Trump’s Tariffs are putting pressures on economic growth.
- Goldman had predicted two rate cuts for this year.
- Economists led by Jan Hatzius said they believe upcoming tariffs to be announced on April 2 hold a greater risk "than many market participants have previously assumed."
Goldman Sachs economists increased their forecast of Federal Reserve interest rate reductions to three this year. They also increased their probability for a U.S. economic recession to 35% as President Donald Trump’s tariffs put pressures on the economy.
"We continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed," economists led by Jan Hatzius wrote in note Sunday.
The economists said they see the Federal Reserve reducing rates in July, September and November—up from their previous projection of two cuts this year. They noted that "the downside risks to the economy from tariffs have increased the likelihood of a package of 2019-style 'insurance' cuts" by the Fed.
Goldman also increased its 12-month recession probability to 35% from 20%, pointing to "soft data" such as a sharp deterioration in household and business confidence and a slowing in real economic growth.
The investment bank raised its forecast for core PCE inflation this year to 3.5%, reduced its GDP growth projection to 1% on a Q4/Q4 basis and increased its outlook for 2025 U.S. unemployment to 4.5%.
Trump announced a 25% tax on imported cars in the last week, and plans to announce another round of tariffs on April 2 against a number of foreign countries. The tariffs are a combination of steel and aluminum levies and are intended to bring manufacturing jobs and manufacturing back to the U.S.
