Bill Dudley

Will Fed policy trigger a US recession?

Allison Nathan, Claudia Sahm, Bill Dudley, Rob Kaplan, Alyssa Nathan

Following the technical activation of the Sahm Rule in July 2024, leading economists are divided on the likelihood of an imminent U.S. recession, with estimates ranging from Goldman Sachs' 20% probability to Bill Dudley's 60% forecast based on conflicting interpretations of labor supply shifts and demand destruction. While Fed Chair Powell signals impending rate cuts, experts like Claudia Sahm and Dudley warn that monetary policy risks lagging behind structural economic shifts, potentially turning a soft landing into an unforced recession if the central bank fails to act decisively. The prevailing base case anticipates a mild downturn or no contraction if the Federal Reserve successfully lowers borrowing costs, though divergent views persist regarding whether current unemployment data reflects a genuine demand shock or a temporary labor force anomaly.