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Goldman Sachs says the probability of a US recession in 12 months is 25% (up from 35% previously)

In March, Goldman Sachs assigned a 35% probability of recession after the collapse of Silicon Valley Bank.

Bank analysts reduced that figure to 25%, citing two main factors:

  • “We have become more confident in our baseline estimate that banking strains will subtract only a modest 0.4 percentage point from real GDP growth this year, as regional bank stock prices have stabilized, Deposit outflows have slowed, lending volumes have held steady and lending surveys point to only limited tightening ahead”
  • “the extreme risk of a disruptive fight against the debt ceiling has disappeared”

GS’ on their Federal Open Market Committee (FOMC) outlook, says there is uncertainty about whether Federal Reserve policymakers need to enter a recession to bring inflation back to their 2% target. The key question is whether the labor market can “smoothly rebalance itself”.

  • expect a 25 basis point rate hike most likely in July, not at the June 13-14 meeting
  • expect a maximum target rate range of 5.25% to 5.5%


  • “Thereafter, we see a long pause of about a year, followed by very gradual cuts”,

  • “On a probability-weighted basis, we continue to believe the rates market is undervaluing the funds rate outlook over the next 1-2 years.”


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