Goldman Sachs sees 35 percent chance of recession in next year

Goldman Sachs forecasts an increased likelihood of a US recession over the next 12 months, with a 35% chance, following the turmoil in the banking industry.

Forecasts by Goldman economists jumped 10 percentage points after the historic collapse of Silicon Valley banks earlier this month. The bank failure shocked the entire banking industry and sparked fears of a wider crisis.

“We have increased the subjective probability that the U.S. economy will enter a recession within the next 12 months by 10% to 35%. ,” said economists led by Jan Hatzius. He said.

With the Federal Reserve (Fed) raising interest rates to curb inflation, fears of a recession persist.

Federal Reserve Chairman Jerome Powell said during a Senate hearing last week that the central bank would continue to raise rates if economic data indicated the need. Powell told lawmakers that signs of an economic slowdown had “partially reversed” after job numbers and economic growth rose more than expected in the past two months.

“January’s data on employment, private consumption, manufacturing production and inflation partially reversed the softening trend seen in data just a month ago,” Powell told lawmakers. The range, along with last quarter’s correction, suggests that inflationary pressures are higher than expected.”

But those comments were made before the Silicon Valley Bank collapse, partly due to rising interest rates. Goldman economists said this week they no longer expect the Fed to raise rates this month as it has stressed banks, but they do expect rate hikes to occur in the coming months.