Goldman Sachs Group Inc. cut its US economic growth estimates for 2023 after recently boosting its predictions for Federal Reserve interest rate hikes.
US gross domestic product will increase 1.1 percent in 2023, economists including Jan Hatzius wrote in a note Friday, compared with a forecast of 1.5 percent previously. The projection for 2022 was left unchanged at 0 percent.
Goldman raised its federal funds rate forecast by 75 basis points over the last two weeks for a terminal rate forecast of 4 percent to 4.25 percent by the end of 2022.
Goldman Lifts Forecasts for Fed Hikes in September and November
“This higher rates path combined with recent tightening in financial conditions implies a somewhat worse outlook for growth and employment next year,” the economists said. “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.”
The Fed’s rate-hike path has been a top focus for economists and investors this year as the central bank seeks to cool stubbornly high inflation.
Goldman also raised forecasts for the unemployment rate to reflect the lower growth, saying it will be about 3.7 percent by end-2022, compared with a call for 3.6 percent previously. It will rise to 4.1 percent by the end of 2023 versus 3.8 percent previously, and to 4.2 percent by end-2024 compared with a prior estimate of 4 percent.
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