Goldman Sachs removed its forecast for a U.S. government shutdown this year given new geopolitical risks and the election of a speaker at the House of Representatives, but warned of risks in 2024.
The brokerage's previous base case was for a shutdown for up to 2-3 weeks in the current quarter ended December, which now seems "much less likely", Goldman Sachs economists led by Jan Hatzius said.
The conflict in Israel and other emerging geopolitical tensions such as the recent U.S. air strikes in Syria would make the Congress less likely to allow a shutdown, which also affects the military, the brokerage said.
The election of House Speaker Mike Johnson after weeks of infighting also reduced the chances of a the government shutting down, economists led by Hatzius added.
Hatzius however said there was still "some risk" of a government shutdown in early 2024, as the likely temporary extension of the spending bill by the Nov. 17 deadline was not expected to resolve the underlying policy disagreements.
"The longer the government operates under short-term extensions, the less likely it will be that Congress will reach a deal on full-year spending bills," said Hatzius.
"So there is still some risk of a shutdown in early 2024."
(Reporting by Roshan Abraham in Bengaluru; Editing by Nivedita Bhattacharjee)
