Associated Press, May 23 (Editor Huang Junzhi) David Solomon, CEO of Goldman Sachs Group, said on Wednesday that he currently expects the Federal Reserve not to cut interest rates this year, because the U.S. economy is more flexible driven by government spending.
At an event held by Boston College, he said: "I still haven't seen convincing data and think we will cut interest rates." He also added that he currently predicted that the Federal Reserve will cut interest rates "zero" times this year, and mentioned that investment related to artificial intelligence (AI) infrastructure will also help the economy better respond to the Federal Reserve's monetary tightening policy.
After Solomon issued the above amazing forecast, the Federal Reserve released the latest meeting minutes, which showed that officials emphasized that based on the disappointing inflation data, the policy interest rate would need to be maintained at the current level for a longer time than previously expected. Although the market had already been prepared, the latest "blow" still made all three major indexes of US stocks fall on Wednesday.
Consumers feel pressure
At the same time, Solomon also pointed out that consumers have begun to feel the pressure brought by price increases. He pointed out that the recently released performance reports of McDonald's Corp. and AutoZone proved that consumers are beginning to control spending.
"If you talk to the CEOs of enterprises that are really involved in the American economy, you will find that these enterprises have begun to see changes in consumer behavior. Inflation is not only nominal. It is cumulative, so everything is more expensive. You begin to see that ordinary American consumers feel this," he added.
He pointed out that compared with six months ago, this change in consumer behavior increased the risk of a "real and obvious" slowdown in the economy. Solomon also mentioned the vulnerability of geopolitics, which he said people will have to endure for a long time.
The prospect of interest rate cut is hard to predict
This is quite different from his previous views. Earlier this month, Solomon said that the economy was "running well", although he warned in March that inflation might be more difficult than the market expected.
In April, the economists' team of Goldman Sachs also revised their expectations for interest rate cuts this year: from three times to two times (in July and November respectively).
John Waldron, president of Goldman Sachs, said at the conference of the Investment Company Association in Washington that there was a great debate within the company about the pace of interest rate reduction, and people who communicated with customers tended to be cautious. He said that their banks did not have a unified view.
"I think that many of us who communicate more with customers, CEOs and others are more cautious about whether the Federal Reserve can act so early." He said.
These controversies reflect analysts' broader struggle to predict the path of the Federal Reserve after experiencing the first wave of large-scale inflation in 40 years.
Finally, Solomon said that in view of the weakness of the European economy and the "structural population problem", the European Central Bank is more likely to cut interest rates this year.
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