The chief executive of Goldman Sachs offered recent insights on the labor market and efforts to cool inflation in the US
During Friday’s episode of the “Exchanges at Goldman Sachs” podcast, CEO David Solomon noted that the U.S. currently has “very low unemployment” and that the job market “across the economy” was “very strong.” ” A “very tight” job market has made cooling inflation “very difficult,” he said.
The Labor Department said the US unemployment rate came in at 3.4% in January. In the same month, total nonfarm payroll employment also increased by 517,000 jobs, as FOX Business previously reported.
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“And so, one of the things that I think is interesting, it’s one of the reasons that I think inflation is going to be stickier, it’s one of the reasons that I think that the higher terminal rate, I think it’s going to be harder for the Fed, and they’re going to have to act more aggressively, to cool the economy,” Solomon said.
“If you’re playing a nine-inning baseball game, I’m not going to tell you, you know, exactly where we are in that game,” he continued. “But we’re somewhere, in my opinion, in the middle of the game. It’s not close to the end of the game. And whether we’re in the third inning or the sixth inning, it’s going to depend.”
In January, inflation rose 0.5% month-on-month and 6.4% year-on-year, according to the latest Consumer Price Index data.
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The Federal Reserve has implemented multiple interest rate hikes as part of its ongoing efforts to bring inflation closer to the 2% target. These included a quarter-point increase at the start of the month and, before that, other larger increases.
“I think when I think about rates, the trajectory of rates, higher/longer,” Solomon said earlier in the podcast.
Solomon said that the market “thinks that the terminal rate is just above 5%” but he offered a prediction that it was “going to be much higher than that.”
He also said at one point that he believed a shallow recession or soft landing was more likely. The United States, Solomon noted, is “still in a period of uncertainty.”
Goldman Sachs has projected “about 1.3% economic growth” for the year, according to the CEO.
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Earlier in the month, while taking part in the Credit Suisse Financial Services Forum, Solomon made similar comments about inflation being “sticky” and the possibility of the US economy going soft.
Megan Henney contributed to this report.