JPMorgan Chief Executive Officer Jamie Dimon on Tuesday, March 12, during a video conference at the Australian Financial Review business summit in Sydney, said that, in his opinion, one should not deny the likelihood of a recession in the United States.
The head of the mentioned lender, which is one of the largest players in the American banking sector, in the context of the specified statement, separately noted that the Federal Reserve System should not rush to decide to start lowering interest rates. It is worth mentioning that last week, Chairman of the central bank of the United States Jerome Powell, during a speech in the House of Representatives, said that the financial regulator was not yet ready to ease monetary policy. According to him, to start implementing appropriate measures, it is necessary to first make sure of the final victory in the fight against inflation. At the same time, Jerome Powell stated that at some point in 2024, the financial regulator is likely to start reducing the cost of borrowing.
The chairman of the Federal Reserve also suggested that interest rates could peak in the current tightening. According to him, the continuation of the economic dynamic that is currently being recorded in the United States will form conditions for easing monetary policy. At the same time, he noted that the prospects for further implementation of the mentioned process continue to be uncertain.
Jamie Dimon said on Tuesday that global prices are currently on a soft landing trajectory, probably at 70-80%. In his opinion, the chance of a soft landing in the next year or two is half that. Separately, the head of one of the largest financial institutions in the United States noted that stagflation would be the worst option.
Jamie Dimon said that economic indicators have been distorted by the coronavirus pandemic. He also noted that the Federal Reserve System may decide at any time to quickly and sharply reduce interest rates, but in this case, do not rush. According to him, in the context of easing monetary policy and the expediency of appropriate action, taking into account the circumstances of economic reality, further confidence in the financial regulator is of particular importance. In case of mistakes due to haste, the central bank of the United States is highly likely to face reputational losses.
Reflecting on the topic of monetary policy easing, Jamie Dimon noted that currently the US has a very low unemployment rate and the trend of wage growth continues. At the same time, he stated that even though the economic system of the United States is currently in good condition, the risk of recession continues to be an actual probability.
The comments of the head of one of the largest financial institutions in the United States contain less optimism than the market sentiment caused by expectations of lower interest rates. It is worth noting that Jamie Dimon is a proponent of a restrained approach to forecasting likely scenarios for the development of the economic situation. He is not inclined to perceive the prospects of the future exclusively in an optimistic paradigm that does not involve any risks. In 2022, Jamie Dimon warned that the United States economy was about to be hit by a hurricane.
