JPMorgan CEO Jamie Dimon warns Wall Street of recession

JPMorgan chief Jamie Dimon sounded the alarm about a possible recession, warning Wall Street to prepare for the threat of rising interest rates even as inflation slows.
“Many things that exist are dangerous and inflationary. Be prepared,” Dimon said at the New York Times DealBook Summit in New York on Wednesday.
“Interest rates could rise and that could lead to a recession,” he added. according to CNN Business.
Dimon’s comments suggest that he does not foresee a rate cut following the next two-day meeting of the Federal Open Market Committee on December 11-12.
Federal Reserve officials have unanimously decided to keep the benchmark federal funds rate at its current 22-year high, between 5.25% and 5.5%, over the past two policy meetings, with little sign of that they are going to cut interest rates in the future.
Federal Reserve Chairman Jerome Powell even reiterated during his closely watched speech at the International Monetary Fund policy panel in Washington, DC, earlier this month: “If it becomes appropriate to tighten policy further, we will not hesitate to do it”.
Economists have been divided over what central bankers’ next move will be and whether that means the U.S. economy is about to suffer a soft landing, leading it to border on a recession, or a hard landing.
“I’m cautious about the economy,” Dimon said, according to CNN.
The 67-year-old investment banking chief also noted that “inflation is hurting people” and, in a moment of positivity, pointed to the resilience of the labor market.
Dimon’s representatives at JPMorgan declined to comment.
Economists have cited the weaker-than-expected October jobs report (when the Bureau of Labor Statistics reported that the U.S. economy added 150,000 jobs) as a sign that an interest rate cut is coming.
The unemployment rate is now 3.9%, the agency said, above the Federal Reserve’s year-end forecast of 3.8%.
Inflation has also tended to be weaker than central bankers’ estimates as Americans see some respite from the Federal Reserve’s aggressive tightening cycle, which began in March 2022, when rates were between 0.25%. and 0.5%.
In June of last year, inflation peaked at 9.1% and rates have since risen at a pace not seen in 40 years.
The Federal Reserve has not cut interest rates in more than a year despite falling inflation, which slowed to 3.2% in October, according to the Consumer Price Index, which tracks changes in costs. of everyday goods and services.
The figure marked a drop from September’s 3.7% gain, although it remains well above the Federal Reserve’s 2% inflation target, which the US economy has not seen since 2012.
In an interview with Bloomberg Last month, Dimon suggested on TV that Americans could expect an interest rate hike of up to 1.5 percentage points, to a staggering 7%, which would mark the highest federal funds rate since December 1990.
Dimon’s warnings about a recession echo those of hedge fund titan Bill Ackman, who said just this week that the Federal Reserve needs to cut interest rates as early as the first quarter to avoid “a real risk of a hard landing” for the US economy. .
Ackman told Bloomberg that if the Federal Reserve keeps rates around 5.5% while inflation tends to be below 3%, “that is a very high real interest rate.”
“What’s happening is that the real interest rate, which is what impacts the economy, continues to rise as inflation decreases,” said the founder of Pershing Square Capital Management.
“I think there’s a real risk of a hard landing if the Fed doesn’t start cutting rates very soon,” Ackman added, according to Bloomberg, noting that he has seen evidence of a weakening economy.
However, traders are not fully pricing in a rate cut until the end of the second quarter of 2024, in June, Bloomberg reported, citing swap market data.
The probability of a cut happening in May is around 80%, the data showed.