• Lloyd Blankfein warned of a "very, very high risk" of recession and companies and consumers should prepare for it
  • The former CEO of Goldman Sachs said the Fed had the tools to avoid it and was responding well.
  • The Fed's monetary tightening efforts to tackle record inflation have led to concerns of a US recession.

The former CEO of Goldman Sachs has warned of a very high of risk of recession for the US economy and said companies and consumers should prepare for it.

Speaking to CBS News' "Face the Nation" on Sunday, Lloyd Blankfein said, "It's certainly a very, very high risk factor," when asked about a recession.

"If I were running a big company, I'd be very prepared for it. If I was a consumer I'd be prepared for it."

Blankfein, who is currently senior chairman at the Wall Street banking giant, praised the Federal Reserve and said they had the ability to avoid a recession.

"There's a path, it's a narrow path. But I think the Fed has very powerful tools. It's hard to finely tune them and it's hard to see the effects of them quickly enough to alter it. But I think they're responding well," he said.

The US is experiencing inflation at 40-year highs and the Fed is under pressure to try to bring some of those price pressures down before they cause serious harm to the economy, but there also concern the central bank could tip the economy into a recession.

The Fed raised interest rates by 50 basis points in May, the biggest increase at one meeting in 22 years to quell inflation. The faster hiking cycle will primarily fight inflation by weakening demand. Chair Jerome Powell said further half-point rate hikes would likely follow at the central bank's policy meetings in June and July, but dismissed the chances of a three-quarter point increase. 

Some market watchers believe there's a case for the central bank to act even tougher on rates, even raising them by 75bps point to try to stave off inflation.

Blankfein said the Fed would have to slow demand and slow the economy by hiking rates to control inflation."And that's going to involve some pain," he said. 

Blankfein said some of the current 8.3% inflation in certain areas would decrease but in others it would persist.

"Some of this will transition away. Some of the supply chain issues will go away. China won't be locked down forever. The Ukraine war will not go on forever," he said. "Some of these things are a little bit stickier, like energy prices. And there are some elements of the supply chain that are going to be a lot stickier." He said for lower-income individuals, the inflation would be very hard.  

Concerns of a recession have divided Wall Street. Bank of America and Deutsche Bank say the US is certain to enter into recession. Others are less pessimistic, with JPMorgan and UBS acknowledging that economic pressures will persist, but don't see a full-on slowdown.

Blankfein said while there was certainly a risk of recession, it wasn't definite.

Blankfein served as the CEO of Goldman Sachs from 2006 through 2018, a tenure that included the 2008 financial crisis. Current CEO David Solomon became the chief executive after Blankfein.

Read more: We interviewed the CEOs of 4 of Warren Buffett's most iconic businesses. Here are their 16 best quotes about the investor, Berkshire Hathaway's ownership, and navigating the pandemic and inflation.

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