GS’ Chief Economist Predicts Slowdown in US GDP Growth

According to an article on CNBC, chief US economist Jan Hatzius at Goldman Sachs (NYSE: GS) said that the US should be prepared to face a 0.5% slowdown in its GDP growth rate during the second half of 2010.

The economist said that the sluggishness would be largely due to domestic factors, such as losses in the inventory cycle that is to end and the stimulus money of the Federal Reserve. According to him, external factors such as the sovereign debt crisis of Europe will not affect the US economy at all or may have an impact of just a "couple of 10ths."

Hatzius also believes that the benchmark interest rate will remain low throughout this year. The Fed has announced that it will sustain the rate for an “extended period.” The noteworthy thing about the Fed’s statement yesterday is that it recognized ‘pockets of trouble hindering economic recovery.’

“They took onboard weaker inflation numbers to a pretty significant degree, recognized the drop in energy and commodity prices and also the drop in core inflation. So it’s pretty much consistent with a Federal Reserve that’s on hold for a very long time,” remarked Hatzius.

RBC Capital Markets’ Tom Porcelli said that he wasn’t expecting an increase in the rates before next year. “The Fed has basically laid out their game plan. The 'extended period' applies because inflation trends are benign, because inflation expectations are anchored and there’s a lot of resource slack,” said Porcelli.

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