Lloyd Blankfein, the Senior Chairman of Goldman Sachs, has urged US consumers and companies to be prepared for a recession, saying that there is a “very, very high risk”.
In an interview, Blankfein said that if he was running a large company, or if he was a consumer, he would be prepared for it. He stressed that recession is not something baked in the cake and there is a very narrow path to elude it.
The former Goldman CEO officer claims that the Federal Reserve has extremely powerful tools to curb inflation and the tools have been responding well.
Blankfein’s statement was broadcasted on the same day as the firm’s economists put forward their US growth forecasts for 2022 and 2023 to reflect the recent shakeout in the US financial markets.
Goldman Sachs‘s economic team, headed by Jan Hatzius, anticipates the GDP of US could grow 2.4 percent this year. It minimized its 2023 estimate to 1.6 percent from 2.2 percent.
This move is termed as “necessary growth slowdown” to make the wage growth less severe and reduce inflation to Fed’s 2% target. While the necessary growth slowdown will spike unemployment, Goldman is optimistic that a sharp rise in joblessness can be avoided.
Blankfein stated that while inflation will be reduced over time as supply chain operations are resolving steadily and Covid-19 lockdowns in China are at ease, some of these things like energy prices are bit stickier.
He also said that Americans took advantage for a long time of globalization, which made goods and other services cheaper due to the availability of cheaper labor abroad.
Blankfein questioned how comfortable the nation would be to rely on supply chain that is not within the borders of the US and the nation cannot control that. Along with this, does the nation feel good about getting all its semiconductors from Taiwan, China.