Dimon sounds the alarm about the impending economic recession in the US: the head of JPMorgan Bank warns of the effects of inflation and the Ukraine war
One of the world’s most famous bankers has warned that a US recession is “absolutely” possible.
Jamie Dimon, CEO of JPMorgan, said inflation and the war in Ukraine are “strong forces” threatening the economy.
He warned that market volatility is inevitable as the US central bank, the Federal Reserve, tightens its quantitative easing program and shrinks its balance sheet.
Warning: Jamie Dimon (pictured with wife Judith) said market volatility was inevitable as the Fed tightened its quantitative easing program and shrunk its balance sheet
“The Fed needs to try to manage this economy and try to get a soft landing, if possible,” said Dimon, 66.
I don’t expect a recession. Is it possible? definitely.’
His comments came as JPMorgan unveiled its first-quarter results. Profits fell 42 per cent from a year ago, to £6.9bn, as the deal-making boom began to slow.
Central banks around the world are under increasing pressure to step up the fight against inflation, which has reached a 30-year high of 7 per cent in the UK, a record 7.5 per cent in the eurozone, and a 41-year high. 8.5 percent in the United States.
Otmar Issing, chief economist at the European Central Bank (ECB) when it was created in 1998, criticized the bank’s “misguided” response to rising inflation, telling the Financial Times: “Inflation was a sleeping dragon. Now that dragon has woken up.”
Against this background, the Bank of England appears to have decided early next month to raise interest rates for the fourth time since December.
“We think rates will rise from 0.75 percent to at least 2 percent next year,” said Ruth Gregory, chief UK economist at Capital Economics.
The US Federal Reserve is set to take action in May after it raised interest rates for the first time in three years last month. The European Central Bank has not yet raised interest rates.
“The ECB has contributed significantly to this trap that it is now in because we are heading towards the risks of a stagflationary environment,” Issing said.
It should be more aggressive and raise interest rates well above the “neutral” level – estimated at around 2.5 percent, said James Bullard, president of the St. Louis branch of the Federal Reserve in the US.
“I think there is a kind of fantasy in the current policy of central banks,” he told the Financial Times. “Neutral does not exert downward pressure on inflation.”
“It just underscores the urgency,” he added, referring to the 8.5 per cent rise in prices in the US.
“The Fed is behind the curve and needs to act.”
