Goldman Sachs Says 30% US Recession Probability This Year, While Insisting on Two Rate Cuts by Year-End: Bad News or Good News?

Goldman Sachs Chief Economist Jan Hatzius raises the probability of a U.S. recession in the next 12 months to 30%, with GDP growth forecasts falling below the potential trend rate; however, Goldman Sachs maintains its baseline forecast of two rate cuts before the end of the year.
(Background: Trump’s “pause in attacking Iran” caused a 2.5 trillion USD global surge in 20 minutes, BTC soared to 71,000, with 659 million USD in liquidations, flooding the market)
(Additional context: Goldman Sachs warns of the “largest oil crisis in history”: Is $110 oil a panic peak or the foundation of a new normal?)

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• Three simultaneous fires: oil prices, tariffs, fiscal withdrawal
• Goldman Sachs vs. bond market: 100 basis points of divergence
• Rate cut expectations and the historical script of crypto markets

One-third chance: Goldman Sachs Chief Economist Jan Hatzius, in the latest research report, raises the U.S. recession probability in the next 12 months from previous levels to 30%, and compresses the second-half GDP annualized growth forecast to a range of 1.25% to 1.75%.

The Atlanta Fed’s GDPNow model also sharply revises Q1 growth forecast down from 3.2% to 2%, indicating that the momentum at the start of the year has clearly weakened.

Three simultaneous fires: oil prices, tariffs, fiscal withdrawal

Goldman Sachs points out three sources of pressure that are simultaneously weighing on the U.S. economy.

First is the geopolitical conflict in the Strait of Hormuz. Goldman Sachs predicts that if the blockade continues until mid-April, oil prices will stay high, tightening financial conditions by about 60 basis points, which could drag down economic growth by 0.5 percentage points in the second half.

Second is the permeating effect of tariff inflation. As of February 2026, tariff policies have contributed 76 basis points to U.S. core PCE inflation. Goldman Sachs describes this as a “temporary price level effect,” but combined with an additional 0.25 percentage points from energy, the year-end core PCE inflation is still expected to stay at 2.5%, still some distance from the Fed’s 2% target.

Third is the withdrawal of fiscal stimulus. The boost from last summer’s fiscal spending is gradually fading, and while subsidies are being cut, the impact of AI on the labor market is expected to intensify after 2026. Goldman Sachs warns that once the economy slows, companies will accelerate layoffs through automation tools, with unemployment potentially rising to 4.6% under baseline scenarios, and reaching 4.8% to 4.9% in severe scenarios.

Goldman Sachs vs. bond market: 100 basis points of divergence

Up to this point, most market participants’ instinctive reaction is: a recession is imminent, and the Fed will have to act. However, the bond market is currently pricing the opposite: expectations of rate hikes are emerging.

Goldman Sachs’s stance is quite different. Hatzius maintains a baseline forecast of a 25 basis point rate cut in September and December, totaling 50 basis points of easing for the year. More importantly, Goldman Sachs believes that if a recession actually occurs, the appropriate weighted federal funds rate at that time would be about 100 basis points lower than current market pricing.

Goldman Sachs’s view is: the bond market has overreacted to short-term inflation pressures, ignoring the structural weakness on the demand side.

Rate cut expectations and the historical script of crypto markets

When recession signals become clear enough, and the Fed moves from expectation to action with rate cuts, liquidity floods back into the market, and risk assets tend to benefit first. Bitcoin’s historical rebounds are often the most dramatic.

Goldman Sachs’s classic script in this report is: rising recession probability → establishing a rate cut path → improving liquidity expectations → risk assets rallying. But timing is uncertain. If a recession arrives early and rate cuts lag behind, market volatility during the waiting period could be quite intense.