Goldman Sachs Chairman Lloyd Blankfein urged businesses and consumers to do soThey are bracing for a recession in the US, calling it “a very, very high risk.
“If I was running a big company, I would be very prepared for it,” Blankfein said on CBS’s “Face the Nation” on Sunday. “If I were a consumer, I would be prepared for that.”
Recession is “not baked into the cake” and there is a “narrow road” to avoid it, She said. The Federal Reserve The former chief executive of Goldman Sachs said it had “very powerful tools” to control inflation and was “responding well”.
With soaring fuel prices and baby formula shortages as a tangible measure of Americans’ unease, US consumer confidence slumped in early May to its lowest level since 2011. US consumer prices are among the fastest in decades.
Blankfein’s comments came on the same day that the company’s economists lowered their forecasts for US growth for this year and next to reflect the recent change in financial markets.
Goldman’s economics team, led by Jan Hatzius, now expects US GDP growth of 2.4% this year, less than 2.6%. It lowered its estimate for 2023 to 1.6% from 2.2%.
The report called this a “necessary growth slowdown” to help moderate wage growth and drive inflation toward the Federal Reserve’s 2% target. While the slowdown will increase unemployment, Goldman was optimistic that a sharp rise in the unemployment rate could be avoided.
Blankfein noted that while some inflation will “disappear” as supply chains relax and Covid-19 lockdowns ease in China, “some of these things are a bit more complex, like energy prices.”
He said Americans have long benefited from globalization, which has made goods and services cheaper thanks to cheap labor abroad.
“How comfortable are we now with confidence in supply chains that are not within the borders of the United States and that we cannot control?” Blankfein said. “Are we satisfied with acquiring all our semiconductors from Taiwan, which is again a target for China?”