(Reuters) – Goldman Sachs on Tuesday lowered the probability of a U.S. recession in the next 12 months to 15%, down from an earlier forecast of 20%.
Continued positive inflation and labor market data led to the downgrade, Goldman Sachs chief economist Jan Hatzius wrote in a note.
The investment bank said it expects real disposable income to reaccelerate next year on the back of continued solid job growth and rising real wages.
It also noted that the drag from monetary policy tightening will continue to recede before it “disappears completely” in early 2024.
US consumer spending accelerated in July, but slowing inflation bolstered expectations that the Federal Reserve would keep rates unchanged at its policy meeting this month.
GS said it believes Fed Chairman Jerome Powell’s “proceed with caution” is a signal that a September rate hike is “off the table” and that the hurdle to a November rate hike is “significant.”
Goldman added that it expected a “very gradual” cut of 25 basis points per quarter from the second quarter of 2024.
(Reporting by Aniruddha Ghosh and Roshan Abraham in Bengaluru; Editing by Rashmi Aich)
