Goldman Sachs cut its forecast for 2023 U.S. Gross Domestic Product as it projects a more aggressive Federal Reserve tightening policy through the rest of this year, and sees that pushing the jobless rate higher than it previously projected.
Goldman Sachs had earlier posted a forecast of 1.5% growth in GDP of the United States.
The most recent reduction in GDP growth projections coincides with growing anxiety over a potential Federal Reserve rate increase.
The US Federal Reserve has been ruthlessly raising benchmark interest rates to combat rising inflation in the US economy.
In June and July 2022, the Federal Reserve raised interest rates in a row by 75 basis points. Currently, the advertised benchmark interest rates range from 2.25% to 2.50%.
In the upcoming monetary policy committee meeting, the US Federal Reserve is expected to raise interest rates by an additional 0.75%, according to Goldman Sachs. By the end of 2022, the global investment bank anticipates that the interest rate will be between 4% and 4.25%.
According to economists, the Federal Reserve’s harsh tactics regarding the tools used to control inflation might seriously hurt the domestic economy of the United States.
“Numerous times over the past few weeks that his staff will continue to use all available economic instruments to keep inflation rates under control.”
Jerome Powell, the chairman of the US Federal Reserve.
The US Fed’s officials are working to reduce inflation rates down below the desired 2% level. The US economy’s employment level will also deteriorate, according to economists, as the outlook for economic output is not very encouraging.
Investors and economists have been paying close attention to the US Federal Reserve’s increases in interest rates.
Due to the US Federal Reserve’s aggressive interest rate strategy, the capital markets in the US are likewise very volatile. Major US indexes have repeatedly experienced significant losses over the past few weeks as Jerome Powell has continued to promote the idea of tightening monetary policy to manage inflation.