Goldman Sachs Chief Executive David Solomon said Wednesday he doesn’t expect the Federal Reserve to cut interest rates this year.
“I’m still at zero cuts,” Solomon said at the Boston University event. “I think we’re set for more sticky inflation.”
His comments came after Federal Reserve policymakers said on Tuesday that the central bank should wait a few more months to ensure that inflation has truly returned to its 2% target before cutting interest rates.
Mr. Solomon’s comments contrast with market expectations that the Fed will cut rates at least once this year.
The U.S. Federal Reserve releases minutes of its April 30-May 1 policy meeting, indicating interest rate setters may take longer to ease inflation than previously thought. Traders on Wednesday lowered their expectations for one or more rate cuts this year after indications that they believe there will be.
Speaking to about 150 business executives and Boston University students, Solomon said he believes the U.S. economy is fundamentally very strong, but that all Americans experience the effects of growth and inflation in the same way. He said he was not there.
“Inflation is not just nominal, it’s cumulative,” Solomon said, citing a recent conversation he had with the CEO of a grocery chain who had seen customers cut back on their purchases in response to rising prices.
“We’re starting to see the average American start to slow down and change their habits,” Solomon added.
The Goldman Sachs CEO also said he expects interest rates to be cut in Europe this year as the region suffers “further economic weakness.”
He expressed concern about a number of headwinds to global growth, from inflationary pressures to geopolitical concerns.
“Geopolitical vulnerability is something we have to accept for the foreseeable future,” Solomon said.
Mr. Solomon also called for a broader approach to industrial policy in the United States.
“We’re probably going to move towards multiple increases in electricity demand without thinking about how we generate the electricity,” he said, adding that support networks for recharging electric vehicles He pointed out the need to build electric vehicles and the increasing burden of charging electric vehicles. Adopting AI technology will have an impact on the existing grid.
