Goldman Sachs CEO David Solomon joined more than a dozen CEOs who in recent months have warned that inflation is not likely to improve this year.
Echoing Biden administration officials who blame Putin and Covid for America’s economic woes, Solomon told analysts on call: “We see inflation deeply entrenched in the economy, and what’s unusual about this particular period is that both demand and supply are being affected by exogenous events, namely the pandemic and the war on Ukraine.”
Transitory inflation, which Treasury Secretary Janet Yellen said Americans were experiencing in 2021, refers to short-term higher prices not leading to serious or large-scale economic damage.
Entrenched inflation indicates that inflation will last longer and be more difficult to reverse.
Many economists warn that entrenched inflation can lead to a wage-price spiral where employees demand wage increases as the cost of goods and services rise. When businesses then pass those costs on to consumers, the “catch-22” dynamic is in play, and the economic death spiral is difficult to escape.
According to a report in The Epoch Times, Solomon said:
“My dialogue with CEOs operating big global businesses, they tell me that they continue to see persistent inflation in their supply chains. Our economists meanwhile say there are signs that inflation will move lower in the second half of the year. The answer is uncertain and we will all be watching it very closely.”
FXStreet news reported that Federal Reserve Chairman Jerome Powell assured Americans the central bank would attempt to prevent inflation from becoming entrenched.
Speaking to Congress in late 2021, Powell told lawmakers: “I assure you we will use our tools to make sure that this high inflation we are experiencing does not become entrenched.”
Confidence in the administration’s ability to lower inflation is waning. Although Biden officials predicted that inflation would ease in 2022, the Consumer Price index in June rose to over 9.1%, a 40-year high.
The Epoch Times reported that in June, the Federal Reserve raised rates by 75 basis points and has signaled another rate increase could be coming in late July.
Solomon expressed his concern at the Fed’s tactic, noting that raising rates has not been effective thus far and continually raising interest rates may impact “corporate confidence and also consumer activity in the economy.”
“I expect there’s going to be more volatility, and there’s going to be more uncertainty and in light of the current environment we will manage all our resources cautiously,” Solomon said.
On Saturday, White House economic adviser Jared Bernstein told Fox News that inflation is “unacceptably high,” but noted he doesn’t believe a recession is looming.
Spouting what some called “word salad” and assuring few, Bernstein said:
“So, for example, inflation, which is unacceptably high—let’s get that clear right out of the gate—went up 1.3 percent in June. Again, an unacceptably high increase. Half of that increase is energy prices alone. Now, since then the price of gas has come down 50 cents a gallon. There are now 20,000 gas stations across this country where gas is below $4 a gallon.”
A report in Forbes indicates that 88 percent of Americans believe the U.S. economy is “on the wrong track.”
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