Goldman Sachs Chief Executive Officer David Solomon has cautioned investors against placing too much trust in the Federal Reserve’s capacity to orchestrate a “soft landing” for the US economy amidst the ongoing battle against inflation.
What Happened: Solomon, speaking at a UBS-organized industry conference on Tuesday, highlighted the potential for a “soft landing” but also underlined the persistent inflationary pressure and geopolitical risks, according to a Financial Times report on Wednesday.
“The market is way weighted to a very soft landing. And when you look at the pattern of facts the last three or four years, it's hard for me to see it's going to be that simple,” Solomon stated.
He also expressed concerns about the financial markets’ overly optimistic predictions for the Fed’s actions and their unwavering belief that the central bank will not push the U.S. economy into a recession.
Despite the Fed’s interest rate hikes, the US has thus far avoided a recession, with unemployment remaining low. However, Solomon noted that there are signs of a slowdown in consumer spending in the lower tier of the economy.
His comments mark a shift from his more optimistic stance in September, where he had stated that the chances of a “soft landing now are materially higher.”
Why It Matters: The U.S. economy’s trajectory and its potential impact on global growth have been the subject of fierce debate in recent weeks.
Economist Mohamed El Erian raised concerns about the U.S. economy’s ability to drive global growth, citing three critical factors that could challenge its automaticity for a “very soft landing.”
Meanwhile, Citi’s chief economist, Andrew Hollenhorst, dismissed the soft landing narrative, warning of an impending recession in 2024.
Former Treasury Secretary Larry Summers also weighed in on the implications of inflation data for interest rates, suggesting that the economy might be undergoing a paradigm shift.
Read Next: Ticking Time Bomb: Over 85% Of Americans Fear National Debt Crisis Impact On Their Future
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