Goldman Sachs now sees only a 20% chance of a US recession in the next 12 months

<p>Goldman Sachs economist Jan Hatzius has cut the chances of a US recession to 20% from 25% previously.</p><p>"The probability of a U.S. recession has fallen further as both recent data and ongoing fundamentals point to rapid — and mostly painless — disinflation from here," he writes. "One reason why we expect most DM economies to achieve a soft landing is that many EM economies have already done so, despite more difficult starting positions in terms of the size of the energy hit and/or the stability of inflation expectations."</p><p>Back in March, Goldman boosted the odds of a recession to 35% and said the Fed wouldn't hike rates at the March 22 meeting. Ultimately, they did hike rates and the bank crisis quickly faded.</p><p>In June, they lowered the odds to 25%, saying: </p><ul><li>“We
have become more confident in our baseline estimate that the banking
stress will subtract only a modest 0.4 percentage points from real GDP
growth this year, as regional bank stock prices have stabilized, deposit
outflows have slowed, lending volumes have held up, and lending surveys
point to only limited tightening ahead”</li><li>“the tail risk of a disruptive debt ceiling fight has disappeared”</li></ul><p>They expect a 25 bps hike at the July FOMC with a peak in the range of 5.25-5.50% with a long pause for a year and then gradual cuts.</p>

This article was written by Adam Button at www.forexlive.com.