Morgan Stanley and Goldman Sachs Forecast Economic Growth Trends in the US
Recently, investment banks Morgan Stanley and Goldman Sachs have updated their economic growth forecasts for the United States, citing the impact of tariff policies and tight labor market conditions. These changes in expectations could significantly affect financial markets and the country's economic policy.
Downgrade of Forecast by Morgan Stanley
On Friday, Morgan Stanley released a revised outlook for economic growth in the US for 2025. The bank adjusted its GDP growth forecast for the fourth quarter of 2025 from 1.9% to 1.5% and for 2026 from 1.3% to 1.2%. The primary reasons for this adjustment include:
Intensified tariff policies in the US;
A strained labor market;
Expected inflationary pressures.
The bank's economists, led by Michael T. Gapen, noted that the effects of tariffs have become more significant than previously anticipated. Markets are likely to feel this pressure sooner than 2026, when the most pronounced negative consequences were thought to be expected.
Inflation and Its Consequences
Inflation has played a crucial role in the revision of forecasts. In Morgan Stanley's memo, it was emphasized that the tariff policy active during President Donald Trump's administration could lead to rising prices for goods and services, which, in turn, increases pressure on the Federal Reserve. The central bank is faced with the challenge of controlling inflation, which may result in changes to its monetary policy.
Expectations of Interest Rate Cuts
Currently, Morgan Stanley predicts a single reduction in the Federal Reserve's interest rate by 25 basis points in June of this year. However, Gapen adds that markets are likely to receive these cuts much later than expected, as the market is projecting nearly three rate cuts this year.
Goldman Sachs' Forecasts
Similar trends are observable at Goldman Sachs. The bank has also lowered its GDP growth forecast for 2025 from 2.2% to 1.7%, confirming the general decline in economic expectations. Additionally, Goldman Sachs has increased the probability of a recession over the next 12 months from 15% to 20%, highlighting the growing concerns among economists about the state of the US economy.
Key Factors Influencing the Economy
The economic situation in the US is influenced by several factors that warrant attention:
Impact of tariffs and trade policy;
Tension in the labor market;
Inflation expectations;
Federal Reserve monetary policy.
Global Trends
Global economic trends also play a significant role, affecting both demand and supply in the US. Negative developments in other countries can also have a ripple effect on the US economy, including trade wars and the ongoing ramifications of the COVID-19 pandemic.
The downgrades of growth forecasts by Morgan Stanley and Goldman Sachs underscore the importance of monitoring the economic situation in the US. Tariff policies, inflation, and labor market conditions remain critical indicators for economists and analysts. These factors can impact the economy's resilience and financial prospects moving forward.
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