Llyod Blankfein, a former Goldman Sachs chief executive warns America that there is a high risk of recession. He adds that if he were still running a big firm, he would choose to prepare for the possibility. According to him, both billion-dollar corporations and consumers should be ready to face a risky recession.
Blankfein agrees that the Federal Reserve has indeed responded well and owned powerful tools. But he still warned that it would be hard to tame the recession this time. In addition, it is too hard to see the direct effect to alter the likelihood of recession. Blankfein knew the elements of inflation would surge. In this case, he noted that such inflation would remain for a while.
He noted a few things that will go away. Transitory would go away, the same as the war in the Ukraine that would be over. Some of the supply chain shocks would also go away. However some of it would be a little bit hard to go away and thus remain to disrupt for a while.
His analysis reflects the most recent Goldman Sachs report that a full-blown recession to 35% in the next two years would happen. This would attack when the Fed struggles to stabilize inflation. Jan Hatzius, Goldman chief economist, argued that the Fed encounters a hard path to land its aim at closing the job-workers gap. Plus, bringing inflation back for its 2% target would be hard too.
Goldman Sachs also reported last month that the first-quarter earnings was 42% lower than first-quarter profits in 2021. Although the Fed has tried hard in mitigating the rising cost of goods, the rate of inflation would remain over 8%. This is actually the highest level since 1981.