JPMorganChairman and CEO Jamie Dimon said the U.S. economy could be in for a “hard landing.”
When asked by CNBC’s Sri Jegarajah about the prospect of a hard landing, Dimon responded: “Can we really see a hard landing? Of course, how can anyone who has read history say there’s no chance?”
The CEO was speaking at the J.P. Morgan Global China Summit in Shanghai.
Dimon said the worst outcome for the U.S. economy would be a “stagflation” scenario, in which inflation continues to rise but growth slows amid high unemployment.
“I look at the various outcomes again, and the worst outcome for all of us is what’s called stagflation, rising interest rates, recession. That means corporate profits are going to go down and we’re going to get through this. I mean , the world survived, but I just think the odds are higher than others think.
Still, he said, “consumers are still in good shape” even as the economy slips into recession.
He noted that the unemployment rate has been below 4% for about two years, adding that wages, home prices and stock prices have been rising.
JPMorgan Chase CEO Jamie Dimon arrives on Capitol Hill in Washington, D.C., for a Senate Banking, Housing and Urban Affairs Committee hearing on September 22, 2022.
Drew Angler | Getty Images
Still, Dimon noted that consumer confidence levels are low. “It seems to be mostly because of inflation…extra money from Covid has been going down. It’s still, you know, at the bottom 50% it’s gone. So I would call it normal, not bad.
Minutes of the Federal Reserve’s May meeting released on Wednesday showed policymakers were increasingly concerned about inflation, with members of the Federal Open Market Committee saying they lacked confidence in easing monetary policy and cutting interest rates.
Timing of Fed rate cut
Dimon said interest rates could still “increase slightly.”
“I think inflation is stickier than people think. I think the likelihood is higher than others think, mainly because the huge fiscal and monetary stimulus is still in the system and may still drive some liquidity.”
Is the world ready for higher inflation? “Not really,” he warned.
according to CME Group Fed Watch Tool, about half of the traders surveyed expected a 25 basis point interest rate cut in September. The Fed expects to cut interest rates by a quarter for all of 2024, but only if the market allows it.
Asked about the prospect and timing of a rate cut, Dimon said that while market expectations were “pretty good, they’re not always right.”
“The whole world says[inflation]will always be at 2%. Then they say it’s going to be 6%, then they’re saying it’s going to be 4%… It’s 100 percent wrong almost every time. Why do you think this is the right time? ?
JPMorgan uses an implicit curve to estimate interest rates, he said, adding: “I knew it would be wrong.
“So just because it says X, doesn’t mean it’s right. It’s always wrong. When you go back to any inflection point in the economy, people think “He said.
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