Goldman Sachs has increased the likelihood of a U.S. recession to 45%, up from 35%, marking the second upward revision in a week. The move follows mounting concerns among major investment banks over the potential economic fallout from intensifying trade tensions.
Early last week, Goldman had already raised its estimate from 20%, citing fears that new tariffs proposed by President Donald Trump could disrupt global markets. After Trump announced even steeper tariffs, global stocks sold off, and recession concerns grew.
Since then, at least seven major banks have raised their recession forecasts. J.P. Morgan now sees a 60% chance of both U.S. and global recessions, citing risks of rising inflation and retaliatory trade measures, including those already announced by China.
Goldman also lowered its U.S. GDP growth forecast for 2025 by 0.2%, to 1.3%, slightly above Wells Fargo’s 1% projection, but more optimistic than J.P. Morgan’s expected 0.3% quarterly contraction.
Interest Rate Outlook
Goldman still anticipates the Fed will cut interest rates by 25 basis points in three consecutive meetings but now expects the first cut to come in June instead of July.
J.P. Morgan forecasts a rate cut at each of the remaining five Fed meetings in 2025, followed by another in January. Wells Fargo has also adjusted its outlook, now expecting three rate cuts this year, up from just one. Market pricing reflects expectations of about 116 basis points in rate cuts this year - suggesting cuts at four of the five remaining Fed meetings.