ICYMI – Morgan Stanley and Goldman Sachs both lowered their US economic growth forecasts

Morgan Stanley are forecasting lower GDP growth for the US due to the negative impact of tariffs and a tight labor market resulting in higher inflation:

• see higher inflation in 2025
• a pronounced and sooner reacceleration in goods prices
• firm inflation, low unemployment could put the Fed in a bind
• 2025 GDP growth projections lowered to 1.5%, slashed from 1.9% previously forecast
• 2026 to 1.2%, from 1.3%
• Morgan Stanley expect only one more 25bp rate cut from the Federal Open Market Committee (FOMC) in 2025, in June
• Morgan Stanley add that they expect two more rate cuts from 2026, later than the market expects

Goldman Sachs:

• 2025 GDP growth projection cut to 1.7%, from 2.2% expected previously
• raised its US recession probability to 20%, from 15%

This article was written by Eamonn Sheridan at www.forexlive.com.