Goldman Sachs’ chief executive recently offered insights on the labor market and efforts to cool inflation in the U.S.
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.” Having a “very tight” job market makes cooling inflation “very hard,” he said.
The Labor Department said the U.S.’s unemployment rate came in at 3.4% in January. In the same month, there was also a 517,000-job increase in total nonfarm payroll employment, as previously reported by FOX Business.
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“And so, one of the things I think is interesting, it’s one of the reasons why I think inflation is going to be stickier, it’s one of the reasons why I think the terminal rate is probably going to be higher, I think it’s going to be harder for the Fed, and they’re going to have to take more aggressive action, 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 view, in the middle of the game. Not near the end of the game. And whether we’re in the third inning or the sixth inning, it will depend.”
In January, inflation went up 0.5% month-over-month and 6.4% year-over-year, according to the most recent Consumer Price Index data.
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Multiple interest rate hikes have been implemented by the Federal Reserve as part of its ongoing efforts to bring inflation closer to the 2% goal. Those have included a quarter-point lift at the beginning of the month and, previously, other larger increases.
“I do think when I think about rates, the trajectory of rates, higher/longer,” Solomon stated earlier in the podcast.
Solomon said the market “thinks a terminal rate is just over 5%” but offered a projection it was “going to be much higher than that.”
He also said at one point that he believed the “chance that we could muddle through with either a shallow recession or a soft landing certainly feels more likely.” The U.S., 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 participating in the Credit Suisse Financial Services Forum, Solomon made similar comments about inflation being “sticky” and the chances of the U.S. economy experiencing a soft landing.
Megan Henney contributed to this report.