:max_bytes(150000):strip_icc()/GettyImages-2162820779-ab8e6b40a6bd412e9ee25547ff61f05b.jpg "Goldman Analysts Say Chance of US Recession in 2025 Has Risen to 25%")
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Key Takeaways
- Goldman Sachs analysts have raised their estimated odds for a U.S. recession to 25% from 15%.
- The investment firm’s research analysts said recession risk remains “limited” overall, noting that the Fed has ample room to cut interest rates to support the economy.
- The July jobs report showed unemployment increasing to 4.3%, but Goldman doesn’t see a trend emerging.
The risk of a recession in 2025 remains limited but is rising, according to analysts at Goldman Sachs Group (GS).
The investment firm now sees the chances of a U.S. recession next year at 25% versus 15% previously, but stressed that the economic data looks “fine overall.” Goldman said it doesn’t expect a disappointing July jobs report—which on Friday showed a rise in unemployment to 4.3%—to become a new trend.
“We continue to see recession risk as limited not only because the data look fine overall and we do not see major financial imbalances,” the analysts said in a Sunday research note, but also because Federal Reserve Chairman Jerome Powell has plenty of room to cut interest rates, if necessary.
Goldman Sees Three Rate Cuts Coming in 2024
Specifically, Goldman analysts said they expect the Fed to deliver three straight cuts of 25 basis points each in September, November and December, according to its weekly economic update released Monday.
“We now expect faster cuts because the [fed] funds rate looks more clearly inappropriately high; the Fed looks behind, having worried too much about inflation for too long and held steady in July; and the rationale for cutting now includes the more urgent priority of supporting the economy,” the analysts said.
Many financial market participants expect even deeper rate cuts in the coming months. Traders are now pricing in an 86% likelihood that the Fed will cut its benchmark rate by half a percentage point at the September policy meeting, according to the CME Group’s FedWatch tool, which forecasts interest rate movements based on fed funds futures trading data. That’s up from 11% a week ago.