Recession fears are growing and warnings from investors and economists seem to be growing every day.
Thursday’s Consumer Price Index report shows inflation has picked up 8.2% over the same period last year in September, so it is likely that the Federal Reserve will continue to raise interest rates.
JPMorgan Chase CEO Jamie Dimon has been sounding recession alarms for some time, even giving a timeline earlier this week. Dimon said Monday he saw a recession will come in six to nine months. He cited the Federal Reserve’s expected rate hikes next year, the long-term effects of the pandemic and the fallout from the war in Ukraine.
Are from “Hurricane Clouds” to one “storm,” he is now reiterating his previous concern – that it is unlikely that the US economy will land lightly and that a recession may not be inevitable at this point.
“I don’t know if it could be a soft landing – I don’t think so, but it could happen,” Dimon said at a conference in Washington DC on Thursday, based on Bloomberg.
He added: “In a tough recession, you can expect the market to drop another 20% to 30%.
The market has plummeted this year.
In an effort to bring inflation down to its 2% target, the Fed has raised interest rates five times this year. The last three hikes are all 75 basis points — raising the benchmark federal funds rate to 3.25 percent to 3.25%, the highest level since 2008. Dimon said his “guts” are telling him the benchmark rate Fed rate could rise to 4% to 4.5%, as inflation remains high.
He is not alone in his prediction. Other economists, including Allianz Chief economic adviser Mohamed El-Erian and former Treasury Secretary Larry Summers, have said it is unlikely the US will avoid a hard landing. Last month, Summers said a difficult landing was “Basically more likely” than a soft landing. He suspects that if inflation falls over the next two to three years it will be the backdrop of a recession. El-Erian said the probability of a recession is “Uncomfortably tall,” blame the Fed for their late response.
Some economists and investors think the Fed’s rate hike is pushing the US into a recession. Jay Hatfield, CEO of Infrastructure Capital Management, told Luck last month that he believes the Fed is “making yet another policy mistake” and that there are risks to the economy if the Fed tightens without giving the agency time to adjust. Economist William Spriggs told Luck that if the Fed continues to raise interest rates aggressively, it will push the US into a recession and millions of people will lose their jobs.
On the other hand, Dimon said he has “full faith and confidence” in Federal Reserve Chairman Jerome Powell.
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