JPMorgan CEO Jamie Dimon says inflation could tip the US economy into a recession next year
Jamie Dimon, the longtime CEO of JPMorgan, continued to sound the alarm about the immediate forecast for the US economy, warning that inflation may soon wipe out consumer wealth and send the country into a recession.
During a conversation on CNBC’s Squawk Box Tuesday, Dimon said that ongoing heightened inflation levels are ‘eroding’ the $1.5trillion in savings Americans amassed during the COVID pandemic.
‘That trillion and a half dollars will run out sometime midyear next year,’ he said. ‘When you’re looking out forward, those things may very well derail the economy and cause a mild or hard recession that people worry about.’
In June, Dimon, 66, flagged to the public that he was preparing his bank – the largest on Wall Street – for an economic ‘hurricane’ on the horizon. In part, that assessment was due to the ongoing war in Ukraine and a number of moves coming out of the Federal Reserve.
JPMorgan Chase CEO Jamie Dimon told CNBC that consumers and companies are currently in good shape, that may not last much longer as the economy slows down
Dimon said US consumers remain in a fairly solid position, despite ongoing record inflation impacting US households
Earlier this year, Dimon made waves when he said economic storm clouds were gathering and could potentially lead to a ‘hurricane’ financial event for the US economy.
On Tuesday, he offered a number of insights, including an emphasis on his previous statement about the potential financial ‘hurricane’ that could occur. While in the hot seat, he said that ‘as a risk manager’ he prepares for the worst case scenario, but that does not necessarily mean the storm clouds will develop into a full blown storm and refused to guess what the coming economic landscape will look like. like.
He added that the Federal Reserve may pause for three to six months after raising interest rates to 5 percent, but that may ‘not be sufficient’ to curb high inflation.
The US central bank last month raised rates by 75 basis points for the fourth consecutive meeting to 3.75 to 4 percent, but it also signaled that it hopes to shift to smaller hikes in borrowing costs as soon as at its next meeting.
Meanwhile, Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that Bank of America’s research shows ‘negative growth’ in the first part of 2023, but the contraction will be ‘mild.’
‘Economic growth is slowing,’ Goldman Sachs’ chief executive David Solomon said. ‘When I talk to our clients, they sound extremely cautious.’
In banking, the job market remains ‘surprisingly tight’ and competition for talent is ‘as tough as ever,’ he said.
A growing number of companies have responded to the slowing economy by slashing jobs in a bid to reign in costs.
Dimon has led JPMorgan since 2006, growing it into Wall Street’s largest bank and weathering the 2008 housing crisis as well as the 2020 COVID downturn.
Dimon said Tuesday that the US economy remains solid and the banking industry, especially, remains in strong shape even as layoffs hit most major financial institutions.
During his wide-ranging Tuesday interview, Dimon also touched on hot-topic cryptocurrency, which he called a ‘complete sideshow’ poisoned by criminality.
He also noted that the world economy is in the middle of a sort of reordering as geopolitical tensions shift and escalate due to factors like the war in Ukraine and COVID supply chain disruptions that have caused some countries to consider restructuring.
Although the US economy is currently going through a challenging patch, especially as compared with the pre-COVID environment, Dimon maintained the position that companies and consumers remain in generally good shape and the US economy remains the strongest in the world.
Furthermore, the banking industry, he said, remains ‘unbelievably sound in a million different ways.’
‘Our capital cup runneth over,’ he said, working to quell any fear that business on the street would not inevitably rebound from any transitory setbacks it may currently be facing.
Job cuts have been announced at many major Wall Street institutions, including modest ones recently announced at Morgan Stanley, as well as Goldman Sachs, Citigroup, and Barclays.