Former Goldman Sachs chief executive Lloyd Blankfein is warning there is a “very, very high risk” of recession — and said if he were still running a “big company,” he would “be prepared” for that possibility.
In a “Face the Nation” appearance Sunday, Blankfein warned that recession is “definitely a risk” and that both billion-dollar corporations and consumers should prepare for it.
Blankfein conceded that the Federal Reserve is “responding well” and “has very powerful tools.” But he cautioned that “it’s hard to finely tune them, and it’s hard to see the effects of them quickly enough to alter” the likelihood of recession.
While Blankfein acknowledged elements of inflation will wane, he also noted it’s likely here to stay — at least for a while.
“Some of that is transitory, will go away … Eventually the war in the Ukraine will be over. Some of the supply chain shocks will go away, but some of it will be a little bit stickier and will be with us for a while,” he said.
Blankfein’s analysis mirrors a recent Goldman Sachs report that elevated the likelihood of a full-blown recession to 35% in the next 24 months as the Fed tried to tame rampant inflation.
“The Fed faces a hard path to a soft landing as it aims to close the jobs-workers gap and bring inflation back towards its 2% target,” Goldman chief economist Jan Hatzius wrote in the report.
Last month, Goldman Sachs reported first-quarter earnings that were 42% lower than first-quarter profits in 2021.
Even as the Fed attempts to mitigate the rising cost of goods, the rate of inflation is still running over 8% — the highest level since 1981, according to the most recent read. While the rate of inflation dropped marginally from 8.5% in March to 8.3% in April, it’s still squeezing everyday Americans.
“Overall for individuals, and certainly for individuals at the bottom quartile of the … pie sharing, it’s going to be quite difficult and oppressive,” Blankfein added of inflation’s disproportionate impact on working-class Americans.
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