Goldman cuts US growth forecast for 2023 after change in Fed rate hike path

US GDP will increase 1.1% in 2023 compared with a forecast of 1.5%, investment bank says

The US Capitol building. Goldman Sachs left the projection for US GDP growth for 2022 unchanged at 0 per cent. AFP

Goldman Sachs Group cut its US economic growth estimates for 2023 after recently boosting its predictions for Federal Reserve interest rate hikes.

US gross domestic product will increase 1.1 per cent in 2023, economists including Jan Hatzius wrote in a note on Friday, compared with a forecast of 1.5 per cent previously.

The projection for 2022 was left unchanged at 0 per cent.

Goldman raised its federal funds rate forecast by 75 basis points over the past two weeks for a terminal rate forecast of 4 per cent to 4.25 per cent by the end of 2022.

“This higher rates path combined with recent tightening in financial conditions implies a somewhat worse outlook for growth and employment next year,” the economists said.

“Our growth forecast is slightly below consensus and implies a below-potential growth trajectory that we believe is necessary to cool wage and price inflation.”

The Fed’s rate hike path has been a top focus for economists and investors this year as the central bank seeks to cool stubbornly high inflation.