Goldman Says Fed Has Made Progress Toward a Soft Landing

Goldman Sachs chief economist Jan Hatzius has reiterated his stance that the U.S. economy can still achieve a soft landing, although he acknowledges “the path is narrow.”

For this to happen, what is required is “sustained below-trend output growth, a rebalancing of the labor market via sharply lower job openings coupled with a moderate rise in unemployment, and a large decline in inflation,” the economist said in a client note.

Judging the progress made by the Fed so far in these areas, Hatzius sees “some encouraging signs.” As far as the recession is concerned, the economist sees a one-in-three possibility that a mild recession will start in the U.S. next year.

“We remain comfortable with our forecast that US growth will remain well below trend over the next year,” Hatzius added.

Goldman’s top economist also noted improvements in the supply-demand balance in the labor market, as seen in the August jobs report.

On the asset valuations, Hatzius took note of a “large rally” that has likely ended after Jackson Hole. Overall, Goldman Sachs strategists see markets trading rangebound.

By Senad Karaahmetovic

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