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Goldman Sachs forecasts 35% chance of a recession in next 2 years
The Fed’s rate hikes ‘not in your favor’: Expert
Macro Intelligence 2 Partners co-founder Julian Brigden explains why he’s unsure whether the Federal Reserve can get inflation under control and avoid a recession.
The Federal Reserve may inadvertently trigger an economic recession next year as it moves to tame the hottest inflation in four decades, according to Goldman Sachs economists.
The economists, led by Jan Hatzius, said in an analyst note that the expected policy tightening trajectory the U.S. central bank is about to embark on raises the odds of a recession to 15% in the next 12 months and 35% within the next 24 months. Hatzius noted that 11 of the 14 tightening cycles since World War II have been followed by a recession within two years, though only eight of them can be partially attributed to Fed policy. Soft, or "softish," landings have become more common recently.
"Taken at face value, these historical patterns suggest the Fed faces a hard path to a soft landing as it aims to close the jobs-workers gap and bring inflation back towards its 2% target," Hatzius wrote.
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The analysis comes as the Fed takes a more hawkish approach to fighting inflation, which is at the highest level since December 1981. Policymakers raised rates by a quarter-percentage point in March, and have since signaled support for a faster, half-percentage point increase at their May meeting.
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