Economic news

Goldman Economist Sees US Inflation Ebbing as Recession Risk Rises

2022.06.24 19:41

Goldman Economist Sees US Inflation Ebbing as Recession Risk Rises
© Bloomberg. Jan Hatzius, chief economist at Goldman Sachs & Co., speaks during a Bloomberg Television interview in New York, U.S., on Thursday, Dec. 14, 2017. Hatzius explained why he doesn’t expect to see an inverted yield curve in 2018.

(Bloomberg) — In the recession debate gripping Wall Street, Goldman Sachs & Co (NYSE:GS). Chief Economist Jan Hatzius might be considered a cautious optimist.

“We don’t have a recession in our base-line forecast,” he told Bloomberg Television’s Surveillance on Friday. “We do have significantly below-trend growth. That rebalances the imbalance in the labor market and that ultimately helps bring inflation back down.”

Hatzius spoke before publication of the University of Michigan’s final June reading of longer-term US consumer inflation expectations sparked a stock-market rally on Friday. The report showed the forecast drawing back from an initially reported 14-year high, potentially reducing the urgency for steeper Federal Reserve interest-rate hikes.

That meshes with Hatzius’s assessment of future Fed decisions. The central bank has hiked its benchmark overnight borrowing rate three times to an upper band of 1.75% this year to cool the hottest inflation in four decades.

“Our forecast is a terminal rate of 3.25% to 3.5% by the end of 2022,” Hatzius said. “We don’t have any additional rate hikes in 2023, basically because the economy is decelerating, inflation is coming down, and I think at that level, the Fed would probably hold.” 

To be sure, the Goldman economist says the risk of a recession has gone up. “If we do have a recession, it’s likely that it would be on the shallower end. Private-sector balance sheets are in better shape than at the end of previous business cycles.”

Also, Hatzius said, “while inflation is very high, I don’t think it’s as entrenched, certainly not as entrenched in inflation expectations, as it was in previous higher inflation episodes in the 1970s and early 1980s.”

For example, the five-year breakeven rate on Treasury Inflation-Protected Securities has retreated to around 2.82% after reaching 3.73% in March. The rate represents the expected average Consumer Price Index over the term of the notes.

“Look at inflation breakevens,” Hatzius said. The credibility from the perspective of the bond market or from forecasters of the Fed’s 2% inflation target “still seems intact.”

Still, one of the drivers of inflation has been a US labor force near full employment. 

“It is very difficult to reduce labor demand without the deterioration feeding on itself and then ultimately culminating in a recession,” Hatzius said. “So we’re giving a 1-in-3 chance of a recession in the next 12 months, and close to 50-50 over the next two years.”

©2022 Bloomberg L.P.

Source

Related Articles

Leave a Reply

Back to top button
bitcoin
Bitcoin (BTC) $ 96,901.96 2.04%
ethereum
Ethereum (ETH) $ 3,319.41 4.45%
tether
Tether (USDT) $ 1.00 0.16%
solana
Solana (SOL) $ 247.21 5.89%
bnb
BNB (BNB) $ 650.80 3.66%
xrp
XRP (XRP) $ 1.34 15.28%
dogecoin
Dogecoin (DOGE) $ 0.408958 11.46%
usd-coin
USDC (USDC) $ 0.999951 0.08%
cardano
Cardano (ADA) $ 0.967979 14.84%
staked-ether
Lido Staked Ether (STETH) $ 3,320.24 4.42%
tron
TRON (TRX) $ 0.203589 7.45%
avalanche-2
Avalanche (AVAX) $ 39.59 8.04%
the-open-network
Toncoin (TON) $ 5.96 4.83%
shiba-inu
Shiba Inu (SHIB) $ 0.000025 9.48%
wrapped-steth
Wrapped stETH (WSTETH) $ 3,930.85 4.50%
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 96,471.85 2.15%
stellar
Stellar (XLM) $ 0.450149 7.62%
polkadot
Polkadot (DOT) $ 8.49 1.57%
chainlink
Chainlink (LINK) $ 16.67 6.19%
bitcoin-cash
Bitcoin Cash (BCH) $ 493.62 7.27%
weth
WETH (WETH) $ 3,318.66 4.38%
sui
Sui (SUI) $ 3.35 8.00%
pepe
Pepe (PEPE) $ 0.00002 10.53%
leo-token
LEO Token (LEO) $ 8.71 0.88%
near
NEAR Protocol (NEAR) $ 6.51 0.35%
litecoin
Litecoin (LTC) $ 93.81 10.19%
aptos
Aptos (APT) $ 11.94 8.55%
uniswap
Uniswap (UNI) $ 10.31 5.49%
wrapped-eeth
Wrapped eETH (WEETH) $ 3,488.15 4.66%
hedera-hashgraph
Hedera (HBAR) $ 0.138869 9.62%
usds
USDS (USDS) $ 1.00 0.13%
internet-computer
Internet Computer (ICP) $ 10.68 8.46%
crypto-com-chain
Cronos (CRO) $ 0.184401 7.07%
polygon-ecosystem-token
POL (ex-MATIC) (POL) $ 0.538592 7.51%
ethereum-classic
Ethereum Classic (ETC) $ 27.85 8.97%
render-token
Render (RENDER) $ 7.47 7.69%
ethena-usde
Ethena USDe (USDE) $ 1.00 0.17%
fetch-ai
Artificial Superintelligence Alliance (FET) $ 1.46 2.22%
kaspa
Kaspa (KAS) $ 0.148798 8.11%
bittensor
Bittensor (TAO) $ 499.73 7.44%
whitebit
WhiteBIT Coin (WBT) $ 24.39 1.27%
dai
Dai (DAI) $ 1.00 0.11%
celestia
Celestia (TIA) $ 8.07 21.21%
arbitrum
Arbitrum (ARB) $ 0.81747 6.50%
bonk
Bonk (BONK) $ 0.000044 13.31%
mantra-dao
MANTRA (OM) $ 3.65 2.64%
vechain
VeChain (VET) $ 0.040147 8.97%
cosmos
Cosmos Hub (ATOM) $ 8.28 2.96%
filecoin
Filecoin (FIL) $ 5.35 0.43%
okb
OKB (OKB) $ 52.45 0.54%