Ceos Of Goldman Sachs And Jpmorgan Warn Of Recession As Labor Shortages Keep Fed Aggressive

As the Federal Reserve aggressively tightens monetary policy due to a tight labor market, Goldman Sachs CEO David Solomon and JPMorgan CEO Jamie Dimon anticipate a U.S. recession. During a panel discussion at the Future Initiative Investment conference in Riyadh, Saudi Arabia, on Tuesday, Solomon stated that he expected economic conditions to “tighten meaningfully” and predicted that the Fed would continue raising interest rates until they reached 4.5%-4.75% before halting. “But if they don’t see real changes — labor is still very, very tight, they are just playing with the demand side by tightening — but if they don’t see real changes in behavior, my guess is they will go further,” he said.

“And I think generally when you find yourself in an economic scenario like this where inflation is embedded, it is very hard to get out of it without a real economic slowdown.” There is currently a target range for the Federal Funds Rate between 3% and 3.5%. However, policymakers have indicated that an additional hike may be necessary, with U.S. inflation still running at an annual rate of 8.2% in September. Philadelphia Fed President Patrick Harker said last week that the central bank’s policy tightening to date had resulted in a “frankly disappointing lack of progress on curtailing inflation,” projecting that rates would need to rise “well above 4%” by the end of the year. Meanwhile, the U.S. Department of Labor reported 10.1 million job openings in August, signaling that employers’ demand for workers, though falling sharply, remains historically high. The central bank policymakers hope that a cooling labor market will lead to lower wage growth, which has reached its highest level in decades and signals that inflation has become embedded within the economy.