Economists at the organisation lowered their forecast for US fourth-quarter gross domestic product (GDP) growth by 0.3 percentage point to 1.2 per cent year on year. The new estimate incorporates expectations for tighter lending and reflect in part a larger downgrade to investment spending, the organisation said in a note.

The tightening in lending standards among smaller US banks is expected to reduce economic growth this year as stress ripples through those institutions, according to Goldman Sachs Research, whose economists have lowered their forecast for fourth-quarter US gross domestic product growth by 0.3 percentage point to 1.2 per cent year on year.

To the extent that banking stress that started with the resolution of Silicon Valley Bank has an impact in lending, it’s likely to be concentrated in a subset of small and medium banks, a report by Goldman Sachs economists Manuel Abecasis and David Mericle.

Goldman Sachs economists expect lending standards will tighten more, to a degree that’s greater than during the dot-com crisis, but less than during the financial crisis or the height of the pandemic.

For monetary policymakers at the Federal Reserve—unless bank stress significantly changes the outlook—their goal for the year will be to keep demand growth below potential to keep the rebalancing of supply and demand on track, they said.

Fibre2Fashion News Desk (DS)