Goldman Sachs CEO David Solomon Says US Will Likely Steer Clear Of Major Slowdown: 'Inflation Could Be Stickier Than People Expect'

Goldman Sachs Group Inc CEO David Solomon shared his optimism about the U.S. economy’s prospects for 2024. However, he also sounded a note of caution about the persistence of inflationary pressures.

What Happened: In an interview with Reuters on Wednesday, Solomon expressed his belief that the U.S. economy would likely avoid a significant slowdown in 2024. He did, however, raise concerns about the possibility of inflation remaining more persistent than anticipated, potentially hampering growth.

“It’s been more constructive than we would have expected,” Solomon said, adding, “I still think there’s a risk, particularly around labor, food, gas, that inflation could be stickier than people expect.”

This warning comes in the wake of a rise in U.S. consumer price inflation to 3.4% in December from 3.1% the previous month. However, when excluding the volatile food and energy costs, the pace of price increases dropped to 3.9% from 4%, indicating a continued moderation in underlying price pressures.

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Despite these concerns, Solomon acknowledged the resilience of consumers and businesses, as well as the robust job market, which has helped prevent the feared economic slump resulting from the Federal Reserve’s previous aggressive campaign to raise borrowing costs.

Why It Matters: Solomon’s cautious optimism is in line with Goldman Sachs’ earlier projections. In November, the investment bank’s analysts, led by Jan Hatzius, predicted a 2024 rebound for the U.S. economy, with a surge in the S&P 500 and bond markets as inflationary pressures eased.

However, the economic outlook for 2024 remains mixed, with some predicting a slowdown and significant interest rate cuts by the Federal Reserve. Wells Fargo predicts the economy may slow down in 2024, with an anticipated growth rate of only 0.8%. While, according to ING Economics, the Federal Reserve is expected to make six rate cuts in 2024 as a strategic move to counter the economic slowdown.

Meanwhile, Goldman Sachs analyst Peter Oppenheimer predicted a new economic “super cycle” driven by artificial intelligence and decarbonization, indicating a potentially significant shift in the global economy.

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