UNITED STATES, WASHINGTON (TRADING SIGNAL GROUP) – The Federal Reserve will face the difficult task of tightening monetary policy (MP) in order to bring down inflation without triggering a recession in the US. According to Goldman Sachs, the probability of a reduction is about 35% over the next two years, writes Bloomberg.
As follows from the Goldman Sachs Group Inc. report, the Fed’s main task now is to close the gap between jobs and the number of workers. It also needs to slow wage growth to a pace in line with his 2% inflation target. This will be done, the bank believes, by tightening financial conditions enough to reduce the number of vacancies without a sharp increase in unemployment.
Achieving a so-called soft landing will not be easy, as Chief Economist Jan Hatzius points out in a research report: Historically, significant U.S. gap narrowing has only occurred during recessions.
“Taken at face value, these historical patterns suggest that the Fed has a difficult path to a soft landing,” Hatzius said, adding that a recession in the country is not inevitable. He believes that normalization of labor supply and durable goods prices after the coronavirus pandemic will help the regulator.
The example of countries from the “big ten” shows that it is quite possible to make a soft drawdown.
The economist cites Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland and the United Kingdom as examples.
However, more and more economists expect a recession in the United States. A Bloomberg poll showed that the consumer price index will average 5.7% in the last three months of the year, compared with the previous estimate of 4.5%.