Recession Coming? Goldman Sachs Report Spooks Sentiments

Goldman Sachs now expects the U.S. Federal Reserve to cut interest rates three times in 2025, in July, September, and November as reported by Reuters. This is a change from their earlier prediction of two cuts in June and December. The revision comes as recession risks grow and uncertainty looms over President Donald Trump’s upcoming tariff announcement.

Higher Risk of Recession

Goldman Sachs has raised the chance of a U.S. recession in the next 12 months from 20% to 35%. The bank believes there is a strong possibility of tariff rates increasing by 15 percentage points, which could hurt economic growth. White House officials have hinted that they are willing to accept short-term economic pain to achieve long-term policy goals.

Federal Reserve Position

The Federal Reserve recently kept its benchmark interest rate steady at 4.25-4.50% in March. Fed Chair Jerome Powell warned of 'unusually high' uncertainty in economic forecasts due to policy changes from the Trump administration.

Economic Indicators

Recent data shows that inflation remains steady. The Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation measure, rose by 0.3% in both January and February. Meanwhile, Goldman Sachs has lowered its GDP growth forecast for the last quarter of 2025 to 1.0% and predicts the unemployment rate will rise to 4.5% by the end of the year.

What It Means for Investors

These changes could impact stock markets, businesses, and consumers. Lower interest rates might help borrowing costs, but trade uncertainties could slow economic growth. Investors and policymakers will be closely watching the Fed’s next moves and the impact of Trump's tariff decisions.