Goldman Sachs Cuts US GDP Forecast Amid Oil Surge

Goldman Sachs Revises US Economic Outlook

Goldman Sachs lowered its Q4 2026 US GDP growth forecast by 0.3 percentage points to 2.2 percent. The revision comes as a direct response to surging oil prices linked to escalating geopolitical tensions.

Oil Price and Inflation Projections

The firm's commodity strategists now expect Brent crude to average 98 dollars per barrel in March and April. Consequently, Goldman Sachs raised its December 2026 headline PCE inflation forecast to 2.9 percent and its core PCE forecast to 2.4 percent, anticipating broader price pressures.

Impact on Monetary Policy and Recession Risk

Reflecting these concerns and a weaker jobs report, the estimated risk of recession over the next 12 months increased by 5 percentage points to 25 percent. The firm also postponed its forecast for the Federal Reserve's first interest rate cut from June to September.

Revised Outlook

The updated forecast highlights significant economic headwinds from higher energy costs. This development will likely influence the Federal Reserve's decisions on monetary policy, with a delayed start to rate cuts now widely anticipated by the market.

FAQ

Q: Why did Goldman Sachs lower the US GDP forecast?
A: The primary reason is the surge in oil prices, with Brent crude expected to average 98 dollars per barrel in the near term due to geopolitical conflict.

Q: How does this affect the Federal Reserve's policy?
A: Goldman Sachs now expects the first rate cut to be delayed from June to September due to higher inflation concerns stemming from rising oil prices.

Source: Investing.com