NEW YORK: Goldman Sachs has predicted that the chances of an economic recession in the US are as high as 35 percent in the next two years.
According to Jan Hatzius, a chief economist at Goldman Sachs, the Fed's main challenge in the coming years will be to reduce the gap between jobs and workers and to slow wage growth to a pace consistent with its 2 percent inflation goal.
Hatzius also noted that the Fed should tighten the financial conditions enough to reduce job openings, without sharply raising unemployment.
However, he asserted that achieving this could be a tough task, as a large decline in the gaps has only occurred during times of recession.
“Taken at face value, these historical patterns suggest the Fed faces a hard path to a soft landing,” said Hatzius.
He also made it clear that a recession may not be inevitable, as post-Covid-19 normalizations in labor supply and durable goods prices will help the Fed.
