'US at very, very high risk of inflation', says Goldman Sachs' Senior Chairman Lloyd Blankfein

The United States is at “very, very high risk” of recession, according to Goldman Sachs’ Senior Chairman Lloyd Blankfein. The investment banker and former Goldman Sachs CEO made the comment during ‘Face the Nation’ on CBS News. According to Blankfein, there is “a very, very high risk factor” that the world’s largest economy is headed for recession. He added that businesses and consumers should brace for it. However, he also mentioned that there is “a narrow path” for the Federal Reserve to make use of its “very powerful tools” and avoid this eventuality. According to Blankfein, the Federal Reserve is “responding well” to the situation. However, he also cautioned that getting inflation rate down is “going to involve some pain”. The Goldman Sachs Senior Chairman’s comments were broadcast the same day that the company’s economists cut their forecast for US growth this year and the next. According to the investment company, the US economy is expected to grow 2.4 percent, this year, down from 2.6 percent. For 2023, the company cut the forecast from 2.2 percent to 1.6 percent. As per Blankfein, while some of the supply chain issues may go away as COVID-19 lockdowns in China and the war in Ukraine eventually end, “stickier issues” like rising energy prices will remain. According to the investment banker, inflation increased due to the extra fiscal spending during the coronavirus pandemic. However, Blankfein feels that the Federal Reserve “reacted sensibly with what they knew at the time.” Earlier this month, the Federal Reserve hiked the benchmark lending rate by 50 basis points, the biggest jump in over two decades, to a range of 0.75 to 1 percent. The United States is facing its worst inflation in 40 years. In March this year, inflation hit 8.5 percent, well above the central bank’s target of 2 percent, due to surging food and energy costs. While inflation has come down to 8.3 percent, more rate hikes are expected in the next few months.