Goldman Sachs has dramatically increased its forecast for the likelihood of a US recession, raising the probability to 35% from its previous estimate of 20%. The prominent Wall Street investment bank cites mounting concerns over tariffs, consumer confidence, and broader economic uncertainties.
The bank's economists warn that higher import duties are creating a tax-like burden on American households, dampening real disposable income and consumer spending. These tariff impacts, combined with unsettled financial markets and hesitant business investment, paint an increasingly concerning economic picture.
"The heightened recession risk reflects our lower growth baseline and the sharp deterioration in household and business confidence over the last month," Goldman's research team noted in their client report.
In response to these headwinds, Goldman now predicts the Federal Reserve will implement three interest rate cuts in 2023, scheduled for July, September, and November. This monetary easing comes despite projections that core inflation could reach 3.5% this year.
The bank has also adjusted its GDP growth forecast downward, estimating that policy changes related to fiscal matters, immigration, and tariffs could reduce economic growth by 1.2 percentage points in the coming year.
Goldman isn't alone in its cautious outlook. Moody's Analytics chief economist Mark Zandi has similarly raised his recession probability estimate to 40%, up from 15%. Some analysts suggest any upcoming economic contraction could be "self-inflicted" as a result of current policy directions.
The revised forecast arrives amid broader concerns about US government debt refinancing needs, with $6.7 trillion in debt requiring refinancing this year. This substantial figure has sparked discussions about the sustainability of America's interest payment obligations, which now exceed the Pentagon's budget.