David Solomon, CEO of Goldman Sachs, gave a speech at the World Economic Forum in Davos, Switzerland on January 23, 2020.
Adam Galacia | CNBC
Goldman Sachs CEO David Salomone e JP Morgan CEO Jamie Dimon expected a recession. due to the tightening on the labor market This made the monetary policy of the US Federal Reserve tighter.
Solomon made the remarks during a panel discussion at the Future Initiative Investment Conference in Riyadh, Saudi Arabia on Tuesday. He expected the economic situation to do so “hence a sharp tightening” and expects the Fed to continue raising interest rates to 4.5% -4.75% before stopping.
“But if they don’t see real change, the workforce is very tight. They are obviously playing on demand by shrinking, but only if they don’t see any real change in behavior. I guess they will go further, “she said.
“And I think generally when you are in an economic situation like this where inflation is buried. It is very difficult to survive a true economic recession ”.
The Fed Funds Rate is currently targeting 3% -3.25%, but Federal Open Market Committee policy makers have signaled that further rate hikes are needed. The US inflation rate remained at 8.2% per annum in September.
Philadelphia Fed Chairman Patrick Harker said last week that the central bank’s strict policies to date have resulted in a “frankly disappointing lack of progress in reducing inflation” as expected. Expect a “better than 4%” interest rate hike by the end of this year.
Meanwhile, the US Department of Labor reported 10.1 million vacancies in August. a signal that the demand for work by employers, although in sharp decline, but still at record levels
Central bank policymakers hope that a colder labor market will help reduce wage growth. which is running at the highest rate in decades. and signal that inflation is rooted in the economy.
“I’m in the same field where we are likely to have a recession in the US … I think it is very likely that we could be in a recession in Europe and so until it gets to the point where you see a change from the side. on the demand side, you can see that the central bank continues to move in that trajectory, ”Solomon added.
JPMorgan CEO Chase Jamie Dimon testifies during the annual oversight of the Senate Banking, Housing and Urban Affairs Committee of the nation’s largest bank in Hart Building on Thursday, Sept. 22. 2022
Tom Williams | CQ-Roll Call, Inc. | Getty Images
GDP The United States contracted 0.9% in the second quarter of 2022, the second consecutive decline and a clear signal that the economy is in recession.
Fellow Wall Street titan Dimon agrees that the Fed will likely continue to aggressively raise interest rates before pausing to allow the data to begin to reflect efforts to curb inflation. But he has an equally pessimistic view on the prospects for economic growth.
“But American consumers, in the end, the excess money they have is running out. which could happen in the middle of next year. And then we’ll know more about what happened to oil and gas prices. And stuff like that, so we’ll find out, ”Dimon said.
