JPMorgan now sees a 35% chance that the U.S. economy will fall into recession before the end of this year, up from 25% at the beginning of last month.
U.S. news “suggests that labor demand has weakened more than expected, with early signs of layoffs emerging,” JPMorgan economists led by Bruce Kasman wrote in a note to clients on Wednesday. The team sees a 45% chance of a recession by the second half of 2025.
"The modest increase in our expectations for recession risk contrasts with a larger reassessment of our interest rate outlook," Kasman and his colleagues wrote. JPMorgan now sees only a 30% chance that the Fed and its peers will keep rates "high for a long time," down from a 50% chance just two months ago.
As U.S. inflation pressures recede, JPMorgan Chase expects the Federal Reserve to cut interest rates by 50 basis points in September and November respectively.
Goldman Sachs has previously reassessed the risk of recession in the US economy, and now believes that the probability of a recession in the next year is 25%.
The realization of a "U.S./global recession" "will almost certainly lead to rapid central bank easing," JPMorgan economists also wrote.
JPMorgan Chase & Co. Chief Executive Jamie Dimon said he doubted inflation could return to the Federal Reserve's 2% target, citing risks including deficit spending and the "remilitarization of the world."
Dimon told CNBC in Kansas City on Wednesday that economic uncertainty related to factors such as geopolitics and quantitative tightening remains significant.
The Federal Reserve may soon cut interest rates, but he added: "I don't think it's as significant as some others think."
Dimon has warned for more than a year that inflation could be more persistent than investors expect, and in an April letter to shareholders, he said JPMorgan was prepared for interest rates to move between 2% and 8% or even higher. "We have made some progress in reducing inflation, but we still face multiple inflationary pressures," he said last month.
Fed Chairman Jerome Powell said last week the central bank could cut interest rates in September because of the risk of a slack labor market. Those concerns were underscored on Friday when July jobs data showed a slowdown in hiring and an unexpected rise in the unemployment rate.
Dimon wrote in The Washington Post last week that the next U.S. president should give the private sector "a seat at the table." He did not mention or endorse any candidate, and he declined to do so on Wednesday.
He also declined to say whether he would consider a cabinet position in the next administration, instead responding: "I love my job."
Dimon, 68, has led JPMorgan for more than 18 years, and questions about how long he will continue to lead have plagued Wall Street.
He often joked that he was five years away from retirement, saying so whenever he was asked, but he told shareholders in May that the timeline was no longer five years.
"Eventually I have to go, I know that," Dimon said Wednesday. "Maybe I'll be chairman for a year or two. There's still some time before I leave the company."
The article is forwarded from: Jinshi Data