Goldman reduces recession forecast once more due to sluggish inflation.

Goldman⁤ Sachs: ‍Odds ⁢of ​Recession Shrink as Inflation​ Falls

Goldman Sachs ‌has‍ announced⁢ that the chances‍ of⁤ a⁣ recession‌ are decreasing,‌ thanks to a⁤ significant drop⁢ in inflation. ‌This ‍is ‍positive‌ news for ⁢President⁣ Joe⁢ Biden’s‍ reelection⁣ campaign.

According to‌ Jan⁢ Hatzius, ​Chief ⁤Economist‍ at Goldman Sachs, the ⁣probability‌ of ⁣a ⁤recession‌ in ‍the‌ next 12⁣ months ‌has decreased to just 20%, down from​ 25% ‌the previous⁤ month. ⁢This⁢ revision ⁣comes ‌after the financial services ⁢giant had already ⁤lowered its ⁢forecast ‌from ⁢35% ⁤in March.

“This remains ‌slightly above ⁤the ⁣unconditional average ⁢postwar probability ⁣of​ 15%—a‍ recession has occurred ⁣approximately every⁢ seven years,”⁢ Hatzius wrote. ⁤“The⁢ main ⁢reason​ for our⁣ cut is that the recent data have⁢ reinforced‍ our​ confidence that‍ bringing‌ inflation‍ down ⁢to ⁣an acceptable ⁣level will not ⁣require ​a‌ recession.”

This update on⁣ recession‌ odds is welcome‍ news⁤ for the‌ Biden⁤ administration, which ⁤has ⁤been​ striving to ‌highlight ​the‌ positive aspects ⁤of ⁢the⁢ economy⁣ under “Bidenomics.” ‍The⁢ administration has​ been ⁢emphasizing‌ the ⁤lower ⁣inflation rates ‌and ‍robust⁣ job market as ⁣evidence of ‍a​ healthy economy. A recession ‍in 2024 would pose a threat ⁢to⁢ Biden’s ⁢reelection⁤ prospects.

The June‍ consumer price ‍index ⁣report ​revealed ‍that ‍inflation ‍has‌ dropped​ to‍ a 3%‌ annual⁣ rate,‌ a full percentage​ point ‌lower than the ⁣previous ⁣month. ⁣Additionally, ​the producer price index for June showed inflation at⁣ just 0.1% for ⁢the ‌year.

These reports indicate ​that the ⁣Federal Reserve is making⁣ unexpected⁢ progress​ in ⁤curbing ⁤inflation, ‌despite ‌the ‌strong labor ⁣market and ⁣historically ​low​ unemployment⁤ rates.

Goldman Sachs’ recession⁣ odds⁢ are now at‍ their lowest ⁤since ​April 2022, ‍when the⁢ firm began ⁤tracking this metric⁣ as⁣ the Fed ⁢started⁢ raising ​interest ⁣rates to ‍control ⁢demand and inflation.

The ⁢Wall⁣ Street Journal, which has‌ been conducting a survey​ of academic ‍economists‌ on ⁢recession​ predictions,‌ also ⁢reported‍ a decline in⁢ recession odds‍ due to ⁢signs⁣ of‍ abating‌ inflation.⁤ According ⁣to the survey, there is⁣ now a 54% ⁣chance ‍of a ⁣recession ⁤in ​the coming ‌year, down from ‍61%⁤ in previous surveys.

Most economists ⁤surveyed ‌attributed their optimism about ⁣the economic ⁢outlook‍ to expectations⁣ of continued inflation ‍slowdown throughout ‍the‌ year.

If ⁣a recession ‌is avoided, it would be a‍ significant achievement for Fed Chairman ⁣Jerome Powell, who⁢ has ⁣expressed some reservations about⁤ achieving a “soft landing” where⁤ inflation is controlled‍ without triggering a⁣ recession.

The Fed ​has ⁤been⁢ raising⁣ rates since March⁣ of last ⁤year,‌ aggressively pushing‍ its⁢ target‍ rate to ​5%​ to 5.25%.

While it is highly ‍likely that the​ Fed will raise rates‍ by ⁢a quarter of⁤ a ​percentage ​point at its next meeting ⁢in⁤ July, ⁣some​ investors​ and economists ⁣believe this ‍hike‌ will‌ signal the‌ Fed’s terminal rate,‌ despite⁤ the central bank’s projection of‌ two more rate revisions in⁣ 2023.

According⁤ to​ CME⁤ Group’s⁣ FedWatch‍ tool, investors currently ​assign a⁤ 13% chance of another interest ‍rate ⁣hike at the Fed’s⁤ September meeting.

“Despite some⁣ assertions​ to the ‍contrary from⁣ more hawkish participants, we ⁤don’t think⁣ the September meeting⁢ is truly ‘live,’” Hatzius ‍said ‍on⁣ Monday. ⁣“Beyond⁢ 2023, we ⁢think⁤ the market is ‌once again building​ in too ‌many‍ rate ‌cuts, ‍not ⁣only relative to our ⁣baseline funds⁤ rate forecast ⁤but also relative to ⁤our⁤ probability-weighted path.”

Click here ‍to read ⁣more from⁤ The ​Washington Examiner.