Goldman Sachs CEO says US economy looks constructive but cautions on inflation

By Megan Davies

DAVOS, Switzerland (Reuters) - Goldman Sachs CEO David Solomon expects the U.S. economy to avoid a big slowdown this year, but warned that inflation could remain more stubborn than expected and weigh on growth.

"It's been more constructive than we would have expected," Solomon told Reuters in an interview on Wednesday. "I still think there's a risk, particularly around labor, food, gas, that inflation could be stickier than people expect."

U.S. consumer price inflation on a 12-month basis rose to 3.4% in December from 3.1% the month before. But, excluding volatile food and energy costs, the pace of price increases fell to 3.9% from 4%, showing ongoing moderation in underlying price pressures.

The Federal Reserve is gauging whether inflation is headed firmly enough back to the central bank's 2% target to allow policymakers to reduce interest rates in coming months.

A year ago, market participants were concerned that the Fed's aggressive campaign to raise borrowing costs would trigger an economic slump, but consumers and businesses have remained resilient and the job market has held up.

"I thought there was a good chance that you had a real slowdown in the economy, but we've had a much softer landing," Solomon said.

His comments come a day after Goldman reported fourth quarter profit that beat estimates. The Wall Street giant's equity traders capitalized on a market recovery and revenue from asset and wealth management rose, offsetting weaker investment banking.

(Reporting by Megan Davies in Davos, writing by Saeed Azhar; editing by Lananh Nguyen)