The US economy is more likely to avoid a recession in the next 12 months, said Jan Hatzius, Chief Economist at Goldman Sachs. Hatzius stated that with the effect of positive data on economic activity and inflation, they lowered their recession expectations and reduced the probability of recession in the USA from 25 percent to 20 percent.
“Based on the notion that a recession is not necessary to bring inflation down to a reasonable level, we reduce the likelihood of a recession in the US within the next 12 months,” Hatzius’s report said. Hatzius stated that there are strong fundamental reasons such as the decrease in core inflation and the expectation of relaxation in inflationary pressures.
However, Hatzius said some slowdown is expected in the coming quarters due to factors such as slowing real disposable personal income growth and decreasing bank lending. However, he said that the easing in financial conditions, the recovery in the housing market and the increase in factory construction show that the US economy will continue to grow even though it is still below the trend.
Addressing the Fed’s interest rate hike, Hatzius said that the next week’s rate hike will likely be the last of the tightening series that started last year.
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