Banking firm Goldman Sachs has cut down its expectations for growth in 2019 because of the volatile financial markets and weaker economic data, said the bank on Saturday. It however assured that there was no immediate chance of a full blown recession.
The comments of the bank were made in a research note in which it reduced its growth forecast for the first half of next year to 2 per cent from 2.4 per cent. The bank also added that in the second half of next year, growth would slow to a virtual even get lower than 2 per cent.
Despite these warnings, the bank declared that it was “still not particularly worried about a recession” which is a concern that has grown in prominence in recent times because of extreme volatility that is dominating trading which is weighing down on major benchmarks and pushing them into the bear market territory.
“In our view, a growth slowdown is necessary to ‘land the plane’ and the two key historical risk factors — inflationary overheating and asset market bubbles — remain largely absent,” Goldman’s analysts wrote.
The bank also thinks that the US Federal Reserve would now put its brakes on increasing borrowing prices even though the central banker is now following a path of progressive interest rate hikes. The bank also hopes that the Fed would reverse its policy in rate hikes in 2020. In the last 12 months, the Fed has made 4 rate hikes and have indicated that two more would be done 2019.
“We now see a probability-weighted 1.2 hikes in all of 2019, from 1.6 hikes beforehand,” Goldman stated. “However, our forecast stays above market pricing, which means a secure funds price in 2019 and cuts in 2020.”
The assumption that the Fed would reverse its current strategy on rates is also being made other than Goldman Sachs mainly because of the head-spinning volatility in the markets that are sending corporate shares into correction territory.
Past records show that a strategy related to changing rates of interests followed by Fed can be altered on a dime according to a writing this week by David Rosenberg, the chief economist and strategist at Gluskin Sheff.
“Once I inform folks the Fed might be easing financial coverage in coming months, the view is met with…laughter. However it isn’t a laughing matter,” Rosenberg informed purchasers in a observe Thursday. “These people who sneer and shake their head simply due to what the central financial institution is saying in the present day usually are not college students of historical past.”
The somber projection by Goldman comes weeks after the bank explained how the falling shares was creating a damaging impression and that the rising rates of interest could be oddest by increased wages and retreating oil costs.
(Adapted from EastAutoNews.com)