Goldman Sachs Group (GS) analysts have noted that while the risk of a recession in 2025 remains relatively low, it is increasing. They now estimate a 25% chance of a U.S. recession next year, up from a previous estimate of 15%. However, they emphasize that the overall economic data appears “fine” and they do not anticipate the July jobs report—a rise in unemployment to 4.3%—to signal a new trend.
In a Sunday research note, the analysts stated, “We continue to see recession risk as limited not only because the data look fine overall and we do not see major financial imbalances,” but also because Federal Reserve Chairman Jerome Powell has sufficient room to lower interest rates if needed.
Goldman Sees Three Rate Cuts Coming in 2024
Goldman analysts expect the Fed to implement three consecutive 25-basis-point rate cuts in September, November, and December, according to their weekly economic update released Monday.
“We now anticipate faster cuts because the [fed] funds rate appears clearly too high; the Fed has lagged, having focused excessively on inflation and kept rates steady in July; and the rationale for cutting now includes the more urgent need to support the economy,” the analysts said.
Many in the financial markets are anticipating even deeper rate cuts in the near future. Traders are now pricing in an 86% chance that the Fed will lower its benchmark rate by half a percentage point at the September policy meeting, according to CME Group's FedWatch tool, which tracks interest rate movements based on fed funds futures trading data. This is a significant increase from the 11% probability estimated a week ago.
