Goldman Sachs CEO Says Inflation May Be More Persistent Than Expected

Goldman Sachs CEO David Solomon reportedly expressed uncertainty about the U.S. economic outlook while highlighting the potential for a soft landing.

The chance of a relatively soft landing has increased over the past year, but inflation may be more persistent than expected, Solomon told Reuters Tuesday (Sept. 12).

Solomon highlighted the Federal Reserve’s efforts to tame inflation through interest rate increases but suggested further action, according to the report, might be necessary. He expressed his personal view that inflation could be stickier than optimistic market participants anticipate, emphasizing that there is still work to be done.

While the current trajectory of the U.S. Treasuries’ forward curve suggests declining rates in the future, Solomon cautioned that this may not materialize, the report said. He emphasized the economic environment’s uncertainty and the need to recognize the ongoing unpredictability.

Despite these uncertainties, Solomon expressed optimism about the U.S. economy’s ability to avoid a recession, per the report. This positive outlook has led to a reopening of capital markets, with significant initial public offerings (IPOs) taking place. Solomon noted that Goldman Sachs has been involved in many of these IPOs, which are progressing well.

However, Solomon also highlighted that mergers and acquisitions may be slower to resume due to the lingering uncertainty, according to the report. He explained that companies are considering a better environment and thinking more strategically, but there is a lag time before they act on these considerations.

In addition to discussing the economic outlook, Solomon criticized U.S. proposals to raise capital requirements for larger banks, the report said. He echoed comments from other bank CEOs, suggesting that these capital rules could have a negative impact on economic growth and limit businesses’ access to capital. Solomon warned that such regulations could push some activity out of the banking system if implemented.

JPMorgan Chase & Co. Chairman and CEO Jamie Dimon has also criticized the capital rules proposed by U.S. regulators. Speaking at a conference in New York, Dimon expressed concerns that these regulations could hinder economic growth, Reuters reported Monday (Sept. 11).

Dimon also called for more transparency in regulators’ decision-making process, emphasizing the importance of fairness, transparency and openness in the regulatory environment.