Goldman Sachs Raises U.S. Recession Risk, Moves Up Fed Rate Cut Forecast:

Goldman Sachs economists now see a 45% chance of a U.S. recession within the next year, up from 35%. This revised estimate comes after the Trump administration announced new tariffs, increasing economic uncertainty. The economists also cut their 2025 Q4-to-Q4 GDP growth forecast from 1% to 0.5%.

Financial Tightening and Policy Uncertainty Behind the Shift
The change reflects tighter financial conditions, growing foreign consumer boycotts, and ongoing policy uncertainty. These factors are expected to slow down business investment more than previously estimated, according to a research note dated April 6 from economists led by Jan Hatzius.

Tariff Effects Could Trigger Recession Forecast
Goldman Sachs’s baseline scenario assumes the average U.S. tariff rate will rise by 15 percentage points. However, if the full slate of April 9 tariffs is implemented, the rate could go up by 20 points, even with some future country-specific deals. In that case, the economists would shift their base forecast to expect a recession.

Federal Reserve Rate Cuts Likely to Begin in June
Assuming no recession, Goldman Sachs expects the Federal Reserve to begin a series of three 25-basis point interest rate cuts starting in June, not July. This would lower the target range to 3.5%-3.75%. But if a recession occurs, the Fed may cut rates by about 200 basis points over the next 12 months.

Probability-Weighted Outlook Matches Market Expectations
Taking into account the higher chance of a recession, the economists now predict a total of 130 basis points in rate cuts this year. This aligns closely with current market pricing as of the most recent trading session.