Goldman Sachs cut its forecast for 2023 U.S. Gross Domestic Product as it projects a more aggressive Federal Reserve tightening policy through the rest of this year, and sees that pushing the jobless rate higher than it previously projected.
Goldman said in a note released late Friday that it now sees GDP growth of 1.1% next year, down from its prior call for 1.5% growth from the fourth quarter of 2022 to the end of 2023.
The influential financial firm now expects the Federal Reserve to hike policy rates by 75 basis points at its meeting next week, up from 50 basis points previously and sees 50 bp hikes in November and December, with the fed funds rate peaking at 4-4.25% by the end of the year.
“This higher rates path combined with recent tightening in financial conditions implies a somewhat worse outlook for growth and employment next year,” Goldman wrote. It sees the unemployment rate at 3.7% by year end, up from 3.6%, and rising to 4.1% by the end of 2023, from 3.8% previously.