JPMorgan CEO Jamie Dimon said that he does not rule out the possibility of a US recession. He believes the Federal Reserve should not introduce interest rate cuts right now.
What are the Views of Jamie Dimon?
JPMorgan Chase & Co.’s CEO Jamie Dimon, during the Australian Financial Review Business Summit in Sydney, said that the world is expecting a soft landing, with a probability of around 70-80%. However, he believes that the chance of a soft landing in the next year or two is half of that, and the worst-case scenario would be stagflation.
Jamie Dimon said that he has not fully trusted the economic indicators since they were affected by COVID-19. He added that the Federal Reserve should wait for more understanding and data before deciding to lower interest rates.
Jamie Dimon said that the Federal Reserve has the option to decrease interest rates quickly and significantly if needed. He added that the current low unemployment rate and rising wages in the United States are factors that the Federal Reserve should consider before making any decision regarding rate cuts.
Jamie said that even though the US economy is doing good, there is still the risk of a recession that is present.
His recent comments regarding the economy are less positive than his sentiments a year ago. Almost two years ago, when central banks started tightening the interest rates, he warned of a “hurricane” that would be approaching the US economy.
Last week, Federal Reserve Chair Jerome Powell said that there is a possibility that the central bank is coming close to having the confidence to start their interest rate cuts.
Powell mentioned on Thursday to the Senate Banking Committee that they are looking at more data to become more confident about inflation reaching the Fed’s 2% target.
He added that once the US economy is close to that confidence level, they will start considering easing back on the restrictions.
Possibility of a US recession
In the fourth quarter of 2023, the economy grew at an annualized rate of 3.2%, slightly lower than the initial estimate of 3.3% issued in January 2024.
The third quarter had a growth rate of 4.9%, and overall, the economy grew over 2.5% in 2023, exceeding the 1.9% growth rate reported in 2022.
The US economy has faced many struggles in the past few years. First, it had to endure the fallout from the COVID-19 pandemic in 2020, followed by an increase in inflation starting in 2021 and a rise in interest rates in 2022 and 2023.
In June 2022, the Consumer Price Index (CPI), a key inflation measure, reached over 9% in the next 12 months. However, right now the inflation has gotten better and is recorded at 3.1% as of January 2024.
Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management, said that in 2023, the US economy showed signs of speed instead of slowing down, which was expected.
The stock market witnessed a strong comeback in 2023, with the S&P 500 increasing over 26%, surpassing its previous high from two years ago. However, most of the positive performances were seen in the technology sector.
Looking ahead, while the market might be volatile in the short term, continued economic strength could benefit other sectors. Despite some reasons for caution in 2024, a recession is seen as unlikely unless some unexpected events are happening over the next few months.
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