It's "uncertain" whether the Federal Reserve "can land the plane very smoothly" as it tightens monetary policy to combat inflation, says Goldman Sachs (GS) CEO David Solomon.
“I’m concerned about the path of this,” Solomon told Yahoo Finance’s Editor-in-chief Andy Serwer at the Milken Institute Global Conference this week.
“I think we'll find a path through. It’s hard to estimate whether we’ll have a soft landing or whether we’ll ultimately have a recession to slow down this inflation that’s embedded in the economy,” he added.
The Federal Reserve has telegraphed it will continue to raise interest rates and begin quantitative tightening in order to combat high inflation.
The markets have reacted in a volatile way. Equities have deflated while Treasury yields have risen in anticipation of the central bank's aggressive moves.
“We’re really getting a response to a combination of loose monetary policy, the pandemic, the disruption it caused, significant fiscal policy— and we’re now coming out of the pandemic and trying to unwind all that in a much more complicated world,” he said.
“I think the situation in Ukraine has made the world more complicated. Geopolitics in China have made the world more complicated. And so we have a more uncertain period that we’ll all have to navigate through,” said Solomon.
Solomon noted that Goldman Sachs put forth a strategy in 2020 to grow the bank and diversify its revenue base with a broader base of products and services.
“We’re executing on that,” said Solomon.
“This is an environment which probably creates some headwinds versus the environment we were living in and operating in 2020 and 2021, but it doesn’t change our strategy,” he added.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre