Goldman Sachs sees the Federal Reserve acting aggressively to tighten monetary policy for the rest of the year.
As a result, Goldman has cut its gross domestic product in the US for 2023 and the unemployment rate will rise higher than previously expected.
In a note released late Friday, Goldman now sees: GDP growth of 1.1% next year, down from the previous call for 1.5% growth from the fourth quarter of 2022 to the end of 2023.
the Federal Reserve has shocked markets with massive rate hikes in an effort to moderate the steepest inflation in 40 years.
The Fed is meeting again this week and another major rate hike is on the table after the consumer price index report came in hotter than expected.
Goldman now expects a 75 basis point increase, up from 50 basis points earlier, and sees a 50 basis point increase in November and December, with Fed Funds yield peaking at 4.25% by the end of the year.
“This higher interest rate path combined with the recent tightening in financial conditions implies a slightly worse outlook for growth and jobs next year,” Goldman wrote.
The projection for the unemployment rate will rise to 3.7% by the end of the year, up from 3.6%, and rise to 4.1% by the end of 2023, from 3.8% earlier.
Reuters contributed to this report.