Wall Street sees higher probability of U.S. recession next year
Reuters
Published Jun 21, 2022 05:41AM ET
Updated Jun 21, 2022 12:31PM ET
(Reuters) -Goldman Sachs forecast a 30% chance of the U.S. economy tipping into recession over the next year, up from 15% earlier, following record-high inflation and a weak macroeconomic backdrop due to the Ukraine conflict.
"We now see recession risk as higher and more front-loaded," Goldman economists said in a note on Monday.
The latest forecast comes about a week after the U.S. Federal Reserve rolled out its biggest rate hike https://reut.rs/3xKXhjZ since 1994 to stem a surge in inflation and as several other central banks also took aggressive steps to tighten monetary policy.
"We are increasingly concerned that the Fed leadership has set a high and inflation-specific bar for slowing the pace of tightening," Goldman said.
Meanwhile, economists at Morgan Stanley (NYSE:MS) on Tuesday placed the odds of a U.S. recession for the next 12 months at around 35%.
"At this point, a recession is no longer just a tail risk given the Fed's predicament with inflation," Morgan Stanley said.
Goldman forecast a 48% cumulative probability of a recession over the next two years compared to its prior forecast of 35%.
"Our best guess is that a recession caused by moderate overtightening would be shallow, though we could imagine it dragging on for a little longer than it would with more policy support," economists at Goldman added.
UBS also said a recession would be shallow if it does happen, but it does not expect one in the United States or globally in 2022 or 2023.
Goldman, before the Fed rate hike, had argued that there was a "feasible though difficult" way to rebalance the labor market and bring down inflation without a recession.
Elon Musk earlier this month told Tesla (NASDAQ:TSLA) Inc executives he had a "super bad feeling" about the economy and that the electric-car maker needed to cut staff https://reut.rs/3tQLC21 and pause hiring.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.