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Great news from 200 West Street: The Federal Reserve has made “remarkable” progress in cooling off the economy which should, in turn, finally start to rein inflation in at some point in the future, Goldman Sachs says. Therefore, the chance of a soft landing has increased “a little.” All in all, “an impressive achievement.”

Bad news from 200 West: They’re still probably gonna fuck it up.

The bank said the risk the Fed raises rates enough to “cause a recession that is not necessary” has “likely increased somewhat.” The main reason for that assessment, Goldman Sachs said, is that it is “increasingly clear” that shelter and health care inflation — two key components of the underlying inflation trend that Fed officials care about — will remain “uncomfortably high throughout 2023” no matter what happens in the jobs market…. “Too great a focus on lagging indicators, too little patience, or tightening too quickly to gauge the impact on the economy in real time could result in a recession that is not entirely intended,” Goldman Sachs said.

“There’s no question that economic conditions are going to tighten meaningfully from here,” [CEO David] Solomon said, referring to interest rate hikes by the Federal Reserve. “If you find yourself in a situation where inflation is embedded, it’s very hard to get out of it without an economic slowdown,” he added, commenting that Europe might already be in recession.

Everyone else of import who made the questionably moral decision to head to Davos in the Desert agrees a recession is inevitable, whatever D-Sol’s bean-counters say about it. But they’re frankly worried about bigger things.

“That’s not the most important thing we think about. We’ll manage through that. I’d worry much more about the geopolitics of the world today,” [JPMorgan Chase CEO Jamie Dimon] told CNN’s Richard Quest…. “The relationships of the Western world would have me far more concerned than whether there’s a mild or slightly severe recession [in the United States],” he added….

Ray Dalio, the billionaire founder of hedge fund Bridgewater, said there is an “existential risk of international war.” What is needed is a “strong political middle” that is “stronger than the extremes,” he added.

Goldman Sachs sees path to a soft landing for the economy getting clearer [CNBC Pro]
The risk of an accidental recession is rising, Goldman Sachs says [CNN]
America’s top bankers are more worried about the state of the world than recession [CNN]

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