Goldman CEO: It’s too risky

‘I wouldn’t do it unless I was compelled to,’ says Lloyd Blankfein

‘I wouldn’t do it,’ Lloyd Blankfein says,

U.S. economic data is not strong enough to support a rate hike, Goldman Sachs CEO Lloyd Blankfein said Wednesday as the Federal Reserve kicked off a twoday policy meeting to discuss whether to raise rates.

The hard economic data “is not compelling to raise interest rates right now,” Blankfein said at an event hosted by The Wall Street

Journal at the Pierre Hotel in Manhattan. “I wouldn’t do it unless I was compelled to do it,” the investment bank’s CEO said.

A rate hike this week would mark the first time the Federal Reserve has boosted short-term interest rates, which are close to zero, in nearly a decade. Historically low rates have raised fears of rising inflation, as well as fears that the central bank has no tools left to stimulate the economy.

But Blankfein dismissed these concerns as not worth the risk. “The risk and the consequences of going too soon and hurting the recovery is vastly disproportionate to the consequences of taking a little bit more incremental inflation risk,” he said.

If the Fed moves ahead with a rate hike, it will be because policymakers “want to get it over with,” Blankfein said. He said the U.S. economy appears to “be on the cusp” of a solid recovery, but he would prefer the economic data to reach “a tipping point” before the central bank takes action. Blankfein also dismissed a 25-basis-point hike, which is what experts predict would be the maximum increase, as “inconsequential.”

“I just don’t think it’s worth the ink,” he said.

There’s a chance that a rate hike, even a small one, will stimulate selling by stock investors, who are already jittery that an economic slowdown in China could spread globally. But assuming the Fed’s plan for minor and incremental rate hikes don’t impede lending, banks stand to benefit from a much-needed boost to the money they earn on loans.

Blankfein agreed with critics that economic growth has been weak in part because regulation following the financial crisis has suppressed Wall Street’s riskier investment activities. But the clamp-down on risk-taking is also a consequence of Wall Streeters feeling “traumatized” by the crisis, he said.