Goldman Sachs Economics on Wednesday's Federal Open Market Committee (FOMC).
On recession risk:
- Powell said that he does not expect a recession, unlike the Fed staff, and he made his clearest statement so far that he thinks a soft landing is possible and finds the labor market rebalancing to date encouraging, views that we share.
- We see this as dovish too—if Powell thinks that a recession is not necessary to solve the inflation problem, he will be reluctant to deliver future hikes that he thinks would materially raise the risk of pushing the economy into a recession.
And, expanding on policy implications:
- The nod toward a June pause was not quite as strong as we had expected
- Chair Powell emphasized twice that [the removal of earlier guidance] is a ‘meaningful change.’
- GS conclude:
- supportive of our call for a pause in June
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