Goldman Sachs raises US recession risk to 25%

Goldman Sachs economists raised the odds of a U.S. recession next year from 15% to 25%. However, they also noted that despite the sharp rise in unemployment, there are "several reasons not to worry about a recession." "We still believe that the risk of a recession is limited. The overall economy still looks good, there are no major financial imbalances, and the Fed has a lot of room to cut interest rates and can do so quickly if necessary," said Goldman Sachs economists led by Jan Hatzius. It is worth noting that Goldman Sachs' forecast for the Fed is not as aggressive as that of JPMorgan and Citi. Hatzius' team expects the Fed to cut its benchmark interest rate by 25 basis points in September, November and December; in contrast, JPMorgan and Citi expect a 50 basis point cut in September. "Our forecast assumes that job growth will resume in August and that the FOMC will consider a 25 basis point rate cut sufficient to address any downside risks," the Goldman Sachs report said. "If we are wrong and the August employment report is as weak as July, a 50 basis point rate cut could be in the cards in September." The economists added that they were skeptical about whether the U.S. labor market was "at risk" of a rapid deterioration. They said so because job openings suggest demand remains solid and there is no obvious shock to trigger a downturn. (Jinshi)