- The US economy might still escape a recession, former Goldman Sachs CEO Lloyd Blankfein says.
- Slowing inflation and resilient growth and employment may enable a soft landing, he says.
The US economy keeps on chugging despite mounting pressures and endless warnings of disaster ahead. The disconnect could mean a downturn is coming, but it won't be a severe one, Lloyd Blankfein says.
"Wall of worry: Inflation falling, yet Fed says too slowly to be done hiking rates…. Economy and payroll growing, yet economists (and the yield curve) say recession is coming," Goldman Sachs' senior chairman and former CEO tweeted on Wednesday.
"Conditions are worrisome BUT: aren't they consistent with what you'd expect heading for a soft landing?" he added.
The Federal Reserve has hiked interest rates from nearly zero to north of 5% since last spring, which has helped to curb inflation from over 9% last summer to 4% in May. The US central bank has signaled it may lift rates higher, as it works to cool inflation to its target level of 2% a year.
Meanwhile, US GDP rose by 1.3% in the first quarter, and non-farm payroll employment grew by 339,000 in May, according to the Bureau of Labor Statistics. Despite the growth in output and jobs, a broad array of economists and commentators are forecasting a recession later this year.
Blankfein's tweet suggests he disagrees with that outlook. Given the inflation threat is waning and the economy is proving resilient, he seems to think the Fed will be able to rein in price growth without causing a serious downturn, then perhaps cut rates to boost output without reigniting inflation.
The billionaire banker, who steered Goldman through the 2008 financial crisis, has struck a positive tone on America's prospects before. At the height of the pandemic crash in March 2020, he predicted the country would rebound quickly due to its strong economy, well-capitalized banks, and the moderate amount of leverage in its financial system.