Concerns About Fed Policy and Recession Risks

The current economic climate raises significant concerns about the Federal Reserve's policy actions and their potential to trigger a recession. Recent labor market indicators, including a weaker than expected jobs report, have led to the activation of the Som Rule, suggesting the U.S. could be on the verge of a recession. Economists from Goldman Sachs anticipate that the Fed may cut interest rates in the coming months, yet there is a divergence in their views on recession risk, with only 20% odds assigned to a downturn. In contrast, some experts believe that if the Fed continues its current course without adjusting its policies, an unforced policy error could exacerbate economic downturns, leading to a recession that may have been avoidable.