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US bankers at Riyadh summit issue warning over world economy

REUTERS/Ahmed Yosri
Participants watch the opening ceremony of the Future Investment Initiative (FII) conference on a digital screen at the Ritz Carlton Hotel, Riyadh, on October 25, 2022

Top Wall Street bankers renewed their warnings about the world economy on Tuesday amid geopolitical tensions and steep interest rate hikes to tackle decades-high inflation.

Goldman Sachs boss David Solomon said economic conditions would “tighten meaningfully from here” and the US Federal Reserve could hike rates beyond 4.5-4.75 percent if it does not see real changes in behaviour.

“If they don’t see real changes – labour is still very, very tight – they’re obviously just playing with the demand side by tightening. But if they don’t see real changes in behaviour, my guess is they’ll go further,” he said.

Speaking at Saudi Arabia’s flagship investment conference, Future Investment Initiative (FII) in Riyadh, he said it was difficult to get out of “embedded inflation” without an economic slowdown.

The process of unwinding 40 years of “nationalised fixed income markets” is “disruptive”, Solomon added.

JPMorgan Chase & Co’s Chief Executive Jamie Dimon, speaking on the same panel, said the geopolitical situation was more concerning than a possible recession in the United States.

Dimon said the conflict between Russia and Ukraine, and tensions between the United States and China were more worrisome than a potential US recession.

“There’s a lot of stuff on the horizon which is bad and could – not necessarily – but could put the US in recession,” he said.

“But that’s not the most important thing for what we think about. We’ll manage right through that. I would worry much more about the geopolitics in the world today,” Dimon added.