Investing.com — Goldman Sachs economists outlined ten key issues shaping the outlook for the U.S. economy in 2025 in a note on Monday:
Will GDP growth be above consensus? Goldman forecasts GDP growth of 2.4% in 2025, beating consensus of 2.0%. They attribute this to strong private domestic demand and business investment supported by artificial intelligence and federal stimulus like the Inflation Reduction Act.
Will consumer spending remain resilient? Yes, according to the investment bank. They expect consumer spending to grow by 2.3% in 2025, driven by solid real income growth, a strong labor market and wealth effects from rising stock markets.
Will the labor market continue to soften? Goldman doesn’t believe that. The unemployment rate is expected to fall slightly to 4% by the end of 2025. Goldman sees strong growth in demand and a slowdown in the supply of immigrant labor contributing to this stability.
Will core PCE inflation net of tariffs fall below 2.4% annually? Goldman forecasts that core PCE inflation will fall to 2.1% by the end of 2025, excluding the impact of tariffs, as wage pressures ease and catch-up inflation subsides.
Fed rate cut? Goldman forecasts three interest rate cuts on a quarterly or every-other basis in March, June and September 2025. This dovish stance reflects the bank’s confidence in declining inflation and the softening effects of potential tariff policies.
Will the estimate of the neutral rate increase? Goldman Sachs economists expect the Fed to raise its median estimate of the neutral rate to 3.25% or higher, reflecting broader demand impacts.
Will President-elect Trump try to fire or demote Fed Chair Powell? The bank doesn’t think so. They said their impression was “that the White House concluded during Trump’s first term that it could not remove the chairman because the law only allows for cause, and the courts are unlikely to agree that failure to cut rates meets this standard.”
Changes in immigration policy? Net immigration is projected to drop to 750,000 a year, in line with tougher policies under the Trump administration.
Tariffs and trade tensions? Goldman expects higher tariffs on Chinese imports, but avoids the scenario of universal tariffs, citing economic and political risks.
Federal budget concerns? A reduction in the deficit is unlikely, according to the bank, with cuts in taxes and defense spending to offset the fiscal constraints. “We also expect federal spending growth to pick up somewhat, particularly on defense. A modest gain in tariff revenue, as noted earlier, would partially offset these changes,” says Goldman.
