JPMorgan ChaseChairman and CEO Jamie Dimon said the possibility of a “hard landing” in the United States could not be ruled out.
When asked by CNBC’s Sri Jegarajah about the possibility of a hard landing, Dimon responded: “Could we actually see a hard landing? Of course, if we learn from history, can we say it’s not a possibility?”
The CEO was speaking at the JP 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 but growth slows amid high unemployment.
“I’ve looked at the different outcomes and think the worst outcome for all of us is what’s called stagflation, rising interest rates, a recession. That means corporate profits will go down, but we’ll get through it all. I mean, the world has gotten through it, but I think it was more likely than others think.”
But even if the economy falls into a recession, “consumers are still in good shape,” he said.
He noted that the unemployment rate has been below 4% for about two years, adding that wages, home prices and stock prices are rising.
JPMorgan Chase CEO Jamie Dimon arrives for a hearing of the Senate Banking, Housing and Urban Affairs Committee on September 22, 2022 at the Capitol in Washington, DC.
Drew Ungerer | Getty Images
However, Dimon noted that consumer confidence levels are low: “Inflation seems to be the main culprit. The money that was added during the pandemic is going down. It’s still there, but it seems to have disappeared for the bottom 50%. So I’d say it’s normal, not bad.”
Minutes from the Fed’s May meeting released Wednesday show policymakers increasingly concerned about inflation, with members of the Federal Open Market Committee saying they lack confidence in easing monetary policy or lowering rates. I showed my point of view.
Timing of Fed rate cut
Dimon said interest rates could still rise “a little bit.”
“I think inflation is more sticky than people think. I think it’s more likely than others think, and the main reason for that is because we still have huge fiscal-monetary stimulus in the system, probably still driving some of this liquidity.”
Is the world prepared for higher inflation? “No,” he warned.
About half of traders surveyed are pricing in a 25 basis point rate cut by September, according to the CME FedWatch tool. The Fed expects to cut rates by 0.25% three times through 2024, but only if markets allow.
Asked about the outlook and timing for a rate cut, Mr. Dimon said market expectations were “pretty good. They’re not always right.”
“The world said this [inflation] I had always intended to stay at 2%. Then he says it will be 6%, then he says it will be 4%…which is 100% wrong almost every time. Why do you think this time is the right time? ”
He said JPMorgan uses an implied curve to estimate interest rates, adding, “We know that’s going to be wrong.”
“So just because it says X doesn’t mean it’s right. It’s always wrong. If you go back to previous economic inflection points, people thought it was X, and then two years later they were completely wrong,” he said.
