Goldman Sachs ( GS) is saying it expects a recession in the U.S. this year and predicting that the Federal Reserve will continue decreasing interest rates in a bid to restore growth. The firm said gross domestic product would shrink by 1% annualized in the second and third quarters of this year, meeting the generally accepted definition of a recession, which is two consecutive quarters of contraction. For the entire year, GDP should increase by 0.8%, Goldman predicted. Because of the slowdown, the Fed will likely have to lower its fed funds target rate to 2.5% from the current 4.25%. The fed funds rate is what banks use to charge each other interest for overnight loans, and it has already been dropped by 100 basis points by the U.S. central bank in recent months. Additionally, Goldman believes the domestic unemployment rate will increase to 6.5% next year, up from the 5% the Labor Department reported last week.