Goldman Sachs chief economist predicts no recession despite Fed’s rate hikes

Goldman Sachs’s chief economist, Jan Hatzius, dismissed concerns of an impending recession due to the Federal Reserve’s successive interest rate increases over the past years in a CNBC interview on Wednesday. This perspective contradicts some Fed officials who foresee enduring “lagged” effects on the economy from these rate adjustments.

Hatzius argued that the most severe negative impacts have already been felt, and the majority of the drag on GDP growth from the Fed’s monetary tightening was experienced in 2022 and early 2023. The recent rise in long-term interest rates has extended the economic deceleration for a few more quarters, but Goldman anticipates these influences will soon fade.

Goldman Sachs suggests that the lag between monetary tightening and GDP growth is shorter than commonly assumed, initiating when markets predict tightening. Hatzius maintains a positive outlook on the economy, forecasting that inflation can decrease without causing substantial harm to the economy.

He also predicts continued growth in real disposable household income, which will be beneficial for consumers. With inflation enduring slightly above 2%, Hatzius expects the Fed will abstain from any rate changes until Q4 of 2024.

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