Will Fed policy trigger a US recession

Financial Data and Key Indicators Changes - The most recent jobs report was much weaker than expected, triggering the Sahm rule, indicating a potential recession as the unemployment rate's three-month average rose by 0.53 percentage points [3][12] - Goldman Sachs economists believe the Fed will cut its benchmark rate by 25 basis points in September, November, and December, with a 20% chance of a US recession in the next 12 months [5][6] Business Line Data and Key Indicators Changes - The labor market shows mixed signals, with hiring rates and quit rates declining, indicating a weakening demand for workers [21][25] - Payroll gains are still solid but are slowing, raising concerns about the direction of the economy [27][30] Market Data and Key Indicators Changes - The unemployment rate is rising gradually, but income and consumer spending are still growing, suggesting the economy is not in contraction [13][30] - The Sahm rule's trigger indicates a potential recession, but the broader context suggests the economy may not be in a recession yet [12][38] Company Strategy and Development Direction and Industry Competition - The Fed's strategy is to manage inflation while maintaining employment levels, with a focus on avoiding unnecessary recession through careful interest rate adjustments [32][49] - There is a concern that the Fed may be behind the curve in responding to economic changes, which could lead to a recession if not addressed [32][48] Management's Comments on Operating Environment and Future Outlook - Claudia Sahm expressed concern that if the Fed continues to push down on the economy, it could lead to an unnecessary recession, indicating a need for decisive action [32][34] - Bill Dudley believes the odds of a recession are between 50% to 60% over the next 12 months, emphasizing the need for the Fed to shift to a neutral monetary policy more quickly [44][49] Other Important Information - The Sahm rule is a statistical indicator that has historically been reliable in predicting recessions, but its application in the current context may not be straightforward [40][41] - The Fed's ability to cut rates provides a buffer against economic downturns, with the potential for a mild recession if necessary [55] Q&A Session Summary Question: Is the Fed behind the curve? - Claudia Sahm stated that if a recession occurs in the next year, it would be a huge unforced policy error, indicating that the Fed needs to act decisively [32] - Bill Dudley expressed that the Fed is behind the curve in reducing interest rates in response to increased risks, suggesting a need for quicker action [48] - Rob Kaplan noted that if the Fed is behind, it is only by a meeting or two, emphasizing the importance of not overreacting to single data points [62]