Goldman Sachs Chairman: "US Economic Recession Is Unavoidable"

Lloyd Blankfein, Senior Chairman of Goldman Sachs [Image source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] Lloyd Blankfein, Senior Chairman of Goldman Sachs, advised that the U.S. economy is in a situation where avoiding a recession is difficult, and households and businesses must firmly prepare for a recession.

According to Bloomberg on the 15th (local time), Chairman Blankfein appeared on CBS's "Face the Nation" and said that a U.S. economic recession is a highly likely risk.

Chairman Blankfein said that as the central bank, the Federal Reserve (Fed), continues to raise the benchmark interest rate to control inflation, there is a risk that the U.S. economy could fall into a recession.

He praised the Fed for having very powerful tools to control inflation and for responding well so far. However, he explained that finely tuning monetary policy is a difficult task and that the effects of policy adjustments are slow to appear, which is a clear risk.

Regarding future inflation outlooks, Blankfein predicted that some causes of inflation, such as supply chain disruptions being resolved and China’s COVID-19 lockdown measures easing, will disappear. However, he expected some inflation factors, like energy prices, to persist longer.

Blankfein also emphasized that the U.S. needs to rebuild its supply chains. He pointed out that while the U.S. has long enjoyed the benefits of globalization, producing goods and services based on cheap overseas labor, it is uncomfortable because the supply chains do not exist within the U.S. and cannot be controlled.

On the same day, Goldman Sachs downgraded its U.S. economic growth forecasts for this year and next year. Goldman Sachs lowered this year’s growth forecast from 2.6% to 2.4%, and next year’s growth forecast from 2.2% to 1.6%.

Goldman Sachs explained in its report that the growth slowdown is necessary to reduce wage growth and inflationary pressures. It also optimistically forecasted that while the growth slowdown poses a risk of raising unemployment, a sharp increase in joblessness can be avoided.