Banking major Goldman Sachs has cut the GDP forecast for the US for 2023, anticipating an aggressive rate hike from the Federal Reserve.
Reportedly, the GDP growth will see a decline of 0.4 per cent to 1.1 per cent from the earlier projection of 1.5 per cent. Meanwhile, the projection for 2022 was left unchanged at zero per cent.
Furthermore, the financial firm expects the US central bank, the Federal Reserve to hike policy rates by 75 basis points in its next meeting.
“This higher rates path combined with recent tightening in financial conditions implies a somewhat worse outlook for growth and employment next year,” said the company.
Read more: Goldman Sachs to start firing employees from next week amid economic slowdown
“Our growth forecast is slightly below consensus and implies a below-potential growth trajectory that we believe is necessary to cool wage and price inflation.” it further added.
The firm also believes that the unemployment rate will skyrocket to 4.1 per cent by the end of 2023, up 0.3 per cent from the previous forecast of 3.8 per cent.
As reported extensively by WION, the US has already seen two consecutive quarters where the economy has contracted; meaning, an unofficial recession has already set in place.
The worries were compounded earlier this week when the Consumer Price Index report was released. The inflation rate stood at a worse-than-expected mark of ‘8.3’ per cent, leading industry experts to predict that the Fed may hike interest rates for a record fifth time this year, next week.
Read more: Biden parties as stock market tumbles, inflation worsens and Fed indicates rate hike
Moreover, as soon as the report came out, the US stock market tumbled to its two-month low.
Reportedly, all three major US stock indices fell well below their numbers set in the month of June. The Dow dropped 139. 40 points to close at 30,822 while S&P 500 closed the week by siding 0.72 per cent. Lastly, Nasdaq Composite slide 0.9 per cent to finish the week at 11,448.
Read more: As recession fears mount, Wall Street tumbles to a two-month low
(With inputs from agencies)
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