Goldman cuts US GDP forecast after Manchin rejects Biden bill

Goldman Sachs Group cut its economic growth forecast for the United States after Joe Manchin, a senator from West Virginia, rejected President Joe Biden’s $2 trillion tax and spending program. leaving Democrats with few options to revive the economic agenda.

The group said in a research note on Sunday that the possible failure of the Build Back Better law led it to reduce its forecast for real gross domestic product in 2022 by 2% in to 2 per cent in the first quarter from 3 per cent previously, 3 per cent in the second quarter versus 3.5 per cent before, and 2.75 per cent in the third quarter from 3 per cent prior.

“We recently assessed the possibility that the revised version of the [Build Back Better] law would be slightly better than the old one, but according to Mr Manchin’s comment, the odds have clearly dropped and we will remove assumptions about our forecast, said Goldman economists led by Jan Hatzius.

Manchin’s announcement caught the White House off-guard, as it came after weeks of negotiations between Biden and West Virginia Democrats, and a day after the Senate adjourned for a vacation. The administration must now  determine if it can partially roll back its tax and spending bills to meet Mr Manchin’s demands while maintaining  support from the rest of the Democratic caucus or not. Goldman said his forecast for headline CPI to hit 7% over the next few months before cooling off means inflation concerns expressed by Mr Manchin and others are likely to continue making the journey more difficult. He also said the Omicron variant has the potential to shift political attention back to virus-related issues and away from long-term reforms.

Regarding monetary policy, she said most Federal Reserve officials are likely to expect a build back better law or similar, and Goldman’s for the Federal Reserve’s open market. He added that he “brings some risk” to expectations. March rate hike. The memo added that “there is still plenty of potential” for Congress to pass a much smaller set of tax schemes to address manufacturing incentives and supply chain issues. “We still believe that Congress could retroactively extend the expanded child tax deduction with some amendments, but it is unlikely.” Goldman said.