Goldman Sachs Senior Chairman Lloyd Blankfein said the US is at "very, very high risk" of recession. His comments come right after the investment banking company's economists cut the 2022 growth forecast for the country.
The economic team led by Jan Hatzius is expecting U.S. gross domestic product to expand 2.4% this year, down from 2.6%. After the recent shake-put in the financial markets, Goldman Sachs has reduced its 2023 estimate to 1.6% from 2.2%, reported Bloomberg.
Speaking on the Face the Nation programme on CBS, Blankfein said people should prepare for the recession. He said if he were running a big company or was a consumer, he would be prepared for the recession.
The US has been facing various problems like high fuel prices and a shortage of baby formula in the last two months. In May, consumer sentiment in the US dropped to the lowest level since 2011. At the same time, consumer prices in the country rose 8.3% in April from last year. It is among the fastest rates in decades.
Goldman's economic team's report called the measures taken "necessary growth slowdown" to temper wage growth and reduce inflation back down toward the Fed's 2% target. The company thinks a sharp rise in joblessness can be avoided but the economic slowdown will push up unemployment.
Blankfein said the inflation is a result of supply chain issues related to the Covid-19 lockdown in China. He noted some things are "a little bit stickier, like energy prices". The Chairman added some of the inflation "will go away" once China eases restrictions.
He also criticised America's dependence on globalisation and asked how comfortable the country is now. The Goldman Sachs leader was talking about the supply chain issues that are not within the US borders and cannot be controlled.
The banker added that a recession can be avoided through a narrow path and noted that the Federal Reserve has "very powerful tools" to reduce inflation.