A U.S. recession is anticipated by Goldman Sachs, JPMorgan, CEO Jamie Dimon, and CEO David Solomon. This is the situation since the Federal Reserve continues its aggressive tightening of monetary policy due to a tight labor market.

Recession In Sight 

The economy will “start to tighten substantially from here,” according to David Solomon. According to his forecast, the Fed would raise interest rates continuously until they hit 4.5% to 4.7% before stopping. 

This came out during a panel discussion he participated in on Tuesday. The forum happened in Riyadh, Saudi Arabia, during a Future Initiative Investment conference.

He said that if they don’t see any significant changes, tightening labor markets is simply a game being played with demand. 

He added that if they don’t see genuine improvements in behavior, he thinks they’ll go even further. 

He said it is difficult to escape an economic situation like this, where inflation is ingrained, without a genuine economic recession.

The current target range for the Fed funds rate is 3%-3.25%. Nonetheless, FOMC members have hinted at the necessity for more rate increases. 

This is taking place even though annual U.S. inflation in September remained at 8.2%.

Patrick Harker, the president of the Philadelphia Fed, said something last week. He said that despite the central bank’s tightening of policy, there had been no success in reducing inflation. 

Even by the end of the year, rates would be required to increase “far beyond 4%,” he said.

Measures To Tackle Inflation 

Meanwhile, 10.1 million job opportunities were reported by the U.S. Department of Labor in August. This shows that, despite a dramatic decline, employers’ demand for labor is still at an all-time high.

Policymakers at central banks anticipate that a slowing labor market will result in slower wage increases. However, the pace of growth in the labor market is at its most significant level in decades. Additionally, it indicates that the economy has been affected by inflation. 

According to Solomon, people may also be experiencing one in Europe. In addition, he believes that the United States is likely to experience a recession. As a result, central banks will likely continue to follow their current course until people see a change, whether in the labor market or consumer demand.

In the second quarter of 2022, the US GDP shrank by 0.9%. Its double-straight quarterly decrease indicates that the economy is in a recession.

Dimon, a fellow Wall Street billionaire, said that the Fed would probably keep escalating rate hikes. However, he said this would be the case before pausing to let the data catch up with its efforts to rein in inflation.

Dimon also expressed similar skepticism over the prospects for economic expansion.

According to Dimon, American consumers’ extra cash will soon run out. He said, “It’ll probably happen somewhere in the middle of next year.” 

After this, people will be more informed about what is happening with oil, gas, and other similar prices.