Traders work on the floor of the New York Stock Exchange (NYSE) on May 18, 2022 in New York City. [Photo/Agencies]
Wells Fargo's CEO said there's "no question" of an economic downturn in the US, and a recession looks difficult to avoid.
Speaking to The Wall Street Journal's "Future of Everything Festival" on Tuesday, Charlie Scharf said, "It's going to be hard to avoid some kind of recession."
He said businesses and consumers are still strong, but the world is reacting to the Federal Reserve as it raises interest rates to tame surging inflation.
"You've got the Fed saying the economy is running too hot, that we need to slow economic growth," Scharf said. "Rates are going to rise, and it's going to change the dynamic of the health of the consumer and business over a period of time." He added that this strength would deteriorate.
US inflation is running at 40-year highs, and the Fed is under pressure to control it before it harms the economy. But there is concern the central bank could tip the economy into a recession by hiking rates too aggressively. The Fed raised interest rates by 50 basis points in May, the biggest increase at one meeting in 22 years. It also signaled that similarly aggressive rate hikes would follow.
Bank of America and Deutsche Bank say the US is certain to enter into recession. Lloyd Blankfein, a former CEO of Goldman Sachs, also warned of a high of risk of recession for the US economy this week. He said companies and consumers should prepare for it. He also said the Fed would have to slow demand and slow the economy by hiking rates to control inflation, adding, "And that's going to involve some pain."