U.S. markets have been looking up heading into 2024, generally speaking, but the head of a major financial institution doesn’t have such a rosy outlook.
Jamie Dimon, the CEO of JPMorgan Chase, said this week that he’s not too convinced that the Federal Reserve will be able to achieve the soft landing that it’s hoping for. The central bank has been aggressively raising its benchmark interest rate for more than a year now in an effort to stamp out inflation.
And while there are signs that the plan is working, Dimon isn’t 100% on board.
During an exclusive interview he gave on Tuesday to Fox News’ “Mornings with Maria,” Dimon said there is still a strong possibility that a full-blown recession could come to America this year.
In fact, he compared the current state of the economy to that of the 1970s, when the U.S. had to endure high inflation for a full decade.
As he said:
“I look at a lot of things, and forget just economic models for a second, $2 trillion of fiscal deficit, the infrastructure and IRA act, the green economy, the remilitarization of the world, the restructuring of trade are all inflationary. And that looks a little more like the 1970s to me.
“So, I think there’s a chance here that people should be prepared that inflation comes down but then bounces around three [percent] and maybe even bounces up a little bit, and those implied curves change. Are people ready for that? I’m not sure.”
Dimon said that during the COVID-19 pandemic, a lot of extra money that the government issued helped to keep a lot of people afloat. That money stretched out for a few years, actually, and helped to fuel the spending that occurred during parts of 2021 and 2022.
Much of that money is running out now, though, so consumers will be losing out on the extra money that they were using to spend. And since the price of just about every good is up, it could cause heck of a negative impact on everyday people.
Dimon said he wasn’t sure whether the recession he said is possible would be mild or heavy, and he did say that he believes the Fed “did the right thing to raise rates.”
As he continued:
“I think it was a little late, and I think they’re doing the right thing just to wait and see what happens. … It takes a while to see the full effect of that … but all of those factors may very well push us to recession, as opposed to a soft landing.”
Most consumers believe that inflation will continue to be above the 2% target rate that the Fed sets for much of 2024. Inflation is right now just more than 3%.
And while that’s certainly not good, it’s way down from the high of 7.1% that was experienced back in June of 2022.
