So far this year, the U.S. economy has defied recession fears and "made substantial progress toward a soft landing," Goldman's David Mericle and the firm's economics team said in a note dated on Sunday.

Goldman now expects a "historically average" 15% chance of recession over the next 12 months, compared to the consensus probability of 48%, the firm said.

The firm expects gross domestic product to grow 2.1% in 2024.

At the same time, the Goldman economists said "the conditions for inflation to return to target are in place, and the heaviest blows from monetary and fiscal tightening are well behind us."

"The hard part of the inflation fight now looks over," they say in the note.

Goldman projects the Fed to deliver its first rate cut in the fourth quarter of 2024 once a key inflation gauge falls below 2.5%.

Goldman then expects one 25 basis point cut per quarter until the second quarter of 2026, when the fed funds rate would reach 3.5-3.75%, a "higher equilibrium rate than last cycle."

By contrast, traders are expecting the Fed to cut rates starting in the middle of 2024, according to LSEG data.

That is similar to the forecast from Morgan Stanley economists, who said in a report that they expect the first 25 basis point cut in June 2024.

The initial rate cut will be followed by cuts at three more Fed meetings next year and at every meeting in 2025, Morgan Stanley said in its economics outlook report.