Goldman Sachs: Expectation that continued increases in oil and gas prices will drag global GDP growth down by 0.4 percentage points; raises the probability of a U.S. recession

Goldman Sachs has released a research report estimating that the outlook for oil and natural gas prices will be further revised upward, which will increase global overall inflation by 1 percentage point, raise global core inflation by 0.2 percentage points, and reduce global gross domestic product (GDP) growth by 0.4 percentage points. In extremely adverse scenarios, these impacts could be amplified two to three times.

The bank noted that while the impact of energy on U.S. growth may be relatively small, it coincides with tightening financial conditions and weakening fiscal stimulus in the second half of the year. Therefore, it expects U.S. economic growth to be below trend, with unemployment rising, and has raised the probability of a recession within 12 months to 30%. The bank still expects the Federal Reserve to cut interest rates in September and December, but has delayed the Bank of England’s rate cut expectations until 2027, and anticipates the European Central Bank to raise rates in April and June.