Lloyd Blankfein, who previously served as the CEO of Goldman Sachs, recently declared that the economy is likely at risk of veering into a major recession. Blankfein’s remarks emerge as the United States Federal Reserve continues increasing interest rates in order to combat rising levels of inflation.
During an appearance on “Face the Nation,” a popular program on CBS, the CEO proclaimed that an imminent recession remains “a very, very high risk factor.”
“There’s a path,” Blankfein continued, “it’s a narrow path.”
While Blankfein retired from the investment firm multiple years ago, he continues to serve as a senior chairman.
“I think the Fed has very powerful tools,” he continued, admitting that it can be difficult to “finely tune” the tools the central bank has at its disposal, especially given the lag factor traditionally involved in macroeconomic analysis.
“It’s hard to see the effects of them quickly enough to alter it,” Blanfein mused before adding, “but I think they’re responding well.”
In spite of the Federal Reserve’s ostensibly healthy response to rising inflation, the former Goldman CEO also hedges by reaffirming the “risk” of imminent inflation.
On the Fed’s part, Chairman Jerome Powell admitted that interest rates will most certainly entail “some pain,” though far more negative outcomes would arise in the long run if prices were to continue spiraling into oblivion.
This past March, the Central Bank issued an approval to a quarter-percentage point increase in the interest rates. Despite this move, the most aggressive the Fed has taken in years, numerous policymakers believe that the central bank became far too lax in keeping price increases in check.
Due to the absence of sharp interest rate increases, a recession may well be more likely than ever before.
As a result, Blankfein informed CBS that he stands in agreement with Powell’s general assessment, observing that various inflationary effects that the economy is experiencing can be considered “sticky.”
Blankfein also noted that the impacts of inflation and rising interest rates will be the most difficult for “the bottom quartile,” adding that the recessionary impacts will be “quite difficult and oppressive.”
Over a 12-year period from 2006 to 2018, Blankfein worked as the CEO at Goldman Sachs, which was a massive beneficiary from Barack Obama’s bailout of selected “too big to fail” banks.
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