• Lloyd Blankfein has warned of a ‘very, very high risk’ of a recession and businesses and consumers should prepare for it
  • The former Goldman Sachs CEO said the Fed had the tools to avoid it and was responding well.
  • The Fed’s monetary tightening efforts to combat record inflation raised fears of a recession in the United States.

The former CEO of Goldman Sachs has warned of a very high risk of


for the US economy and said businesses and consumers should prepare for it.

Speaking to CBS News’ “Face the Nation” on Sunday, Lloyd Blankfein said, “It’s definitely a very, very high risk factor,” when asked about a recession.

“If I was running a big business, I would be very prepared for this. If I was a consumer, I would be prepared for this.”

Blankfein, who is currently senior chairman of the Wall Street banking giant, praised the Federal Reserve and said it has the ability to avoid a recession.

“There is a path, it’s a narrow path. But I think the Fed has very powerful tools. It’s hard to fine-tune them and it’s hard to see the effects quickly enough to change it. But I think they’re responding well,” he said.

The United States is experiencing inflation at its highest level in 40 years and the Fed is under pressure to try to reduce some of these price pressures before they cause serious damage to the economy, but the central bank also fears that the economy could tip into a recession.

The Fed raised interest rates by 50 basis points in May, the biggest increase at a meeting in 22 years to curb inflation. The faster up cycle will primarily fight inflation by weakening demand. Chairman Jerome Powell said further half-point rate hikes were likely to follow at central bank policy meetings in June and July, but dismissed chances of a three-quarter-point hike.

Some market watchers believe the central bank should act even tougher on rates, even raising them by 75 basis points in an attempt to stave off inflation.

Blankfein said the Fed should dampen demand and slow the economy by raising rates to control inflation. “And that’s going to involve some pain,” he said.

Blankfein said some of the current inflation of 8.3% in some regions would come down, but in others it would persist.

“Some of these issues will go away. Some supply chain issues will go away. China won’t be locked down forever. The war in Ukraine won’t last forever,” he said. “Some of these things are a little stickier, like energy prices. And there are some elements of the supply chain that are going to be a lot stickier.” He said that for people with low incomes, inflation would be very difficult.

Fears of a recession have divided Wall Street. Bank of America and Deutsche Bank say the United States will definitely enter a recession. Others are less pessimistic, with JPMorgan and UBS acknowledging that economic pressures will persist, but see no complete slowdown.

Blankfein said while there was definitely a risk of a recession, it wasn’t certain.

Blankfein was CEO of Goldman Sachs from 2006 to 2018, a tenure that included the 2008 financial crisis. Current CEO David Solomon became the chief executive after Blankfein.

Read more: We interviewed the CEOs of 4 of Warren Buffett’s most iconic companies. Here are their 16 best quotes on investing, owning Berkshire Hathaway, and navigating the pandemic and inflation.

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