(Reuters) – Goldman Sachs on Tuesday cut its odds of a U.S. recession in the next 12 months to 15 percent from a forecast of 20 percent.
“Continued positive inflation and labor market data have dampened expectations,” Goldman Sachs chief economist Jan Hatsius wrote in a note.
The investment bank said real disposable income is expected to accelerate next year on the back of continued strong job growth and rising real wages.
In the year He also suggested that the pull from monetary policy tightening would be reduced “before disappearing completely” in early 2024.
US consumer spending accelerated in July, but a slowdown in inflation strengthened expectations that the Federal Reserve would keep interest rates unchanged at its policy meeting this month.
GS believes that Fed Chairman Jerome Powell’s “proceed with caution” approach indicates that a September hike is “off the table” and that the hurdle to a November hike is “significant.”
Goldman added that it expects a “very slow” reduction of 25 basis points every quarter starting in the second quarter of 2024.
(Reporting by Aniruddha Ghosh and Roshan Abraham in Bengaluru; Editing by Rashmi Aich)