Goldman Sachs CEO David Solomon poured cold water on hopes that the Federal Reserve could achieve a “soft landing” in its fight to curb inflation.
“The world is poised for a soft landing,” Solomon said at a bankers conference in Miami on Tuesday, as inflation remains stubbornly above the Fed’s 2% target rate. “The level of uncertainty is increasing,” he said.
“The market is very heavily weighted toward a very soft landing. And if you look at the fact pattern over the last three or four years, I don’t think it’s going to be that simple,” Solomon said. said.
His comment is The Financial Times reported.
Mr. Solomon dismissed the idea that the Fed would ease monetary policy as quickly and intensively as some had expected.
“When I went on TV a month ago in Davos and they said they had agreed to seven rate cuts, I said, ‘Well, I don’t understand this at all,'” Solomon said.
Markets are currently pricing in at least three rate cuts this year, with the earliest expected in May or June.
“The top end of the U.S. economy is doing very well,” Solomon said, but he also noted that consumer spending at the bottom end of the economy is slowing.
Jamie Dimon, Mr. Solomon’s counterpart at JPMorgan Chase & Co., told CNBC on Monday that he believes there is a more than 50% chance the economy will fall into recession.
“The market is pricing in a soft landing in a sense. There’s a good chance that will happen.” Dimon told CNBC on Monday.
“but [market’s] The probability is 70-80%. I’ll give you half, that’s all. ”
Minutes from the Jan. 30-31 meeting show that most policymakers at the last Federal Reserve meeting expressed widespread uncertainty about how long borrowing costs should remain at current levels. There were concerns about the risk of cutting interest rates too soon.
“Participants highlighted uncertainty about how long a restrictive monetary policy stance would need to be maintained” to bring inflation back to the Fed’s 2% target, the minutes said. has been done.
“Most participants pointed to the risks of acting too hastily to ease the policy stance,” but also “pointed out the downside risks to the economy from maintaining an overly restrictive stance for an extended period.” Only a few people did.”
Kansas City Federal Reserve Bank President Jeffrey Schmidt used his debut policy speech Monday to signal that he remains focused on the threat of high inflation and is in no rush to cut interest rates.
In his first major public remarks since taking office last August, Schmidt said: “With inflation above target, a tight labor market and significant demand momentum, My own view is that there is no need to preemptively adjust policy stances.”
“Rather, I think the best course of action is to be patient, continue to monitor how the economy responds to the policy tightening that has occurred so far, and wait for convincing evidence that we are winning the war on inflation.” I believe.”
Mr. Schmidt’s approach suggests a hawkish outlook in line with the recent president of the Kansas City Fed. In fact, he told the Economic Club of Oklahoma that Esther George and Thomas Honig were “dear friends.”
