Goldman Sachs Forecasts 3 US Interest Rate Cuts in 2025 with Recession Risk at 35%
Goldman Sachs updates its 2025 economic outlook, predicting three Federal Reserve rate cuts and raising recession chances to 35% amid ongoing tariff pressures.
Key Insights
- Goldman Sachs economists now anticipate three Federal Reserve interest rate cuts in 2025, up from their previous estimate of two.
- The probability of a U.S. recession within the next 12 months has been increased to 35%, reflecting growing economic concerns.
- Upcoming tariffs scheduled for April 2 are viewed as a significant risk factor impacting economic growth more than previously recognized.
Goldman Sachs has revised its forecast, projecting three rate reductions by the Federal Reserve throughout 2025. This adjustment reflects heightened concerns over economic growth pressures caused by tariffs imposed by the U.S. government.
Led by economist Jan Hatzius, the team highlighted that the tariffs planned for April 2 represent a greater threat to the economy than many market participants had anticipated.
The anticipated rate cuts are expected to occur in July, September, and November, signaling a shift towards more accommodative monetary policy to counteract downside economic risks.
Goldman Sachs also raised the likelihood of a recession within the next year to 35%, up from 20%, citing weakening household and business confidence alongside slower real GDP growth.
The bank adjusted its core Personal Consumption Expenditures (PCE) inflation forecast to 3.5% for 2025, lowered GDP growth expectations to 1% year-over-year for Q4, and projected U.S. unemployment to rise to 4.5%.
These developments come as President Trump recently implemented a 25% tariff on imported vehicles and plans additional tariffs targeting multiple foreign nations, aiming to boost domestic manufacturing and employment.
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