Dimon says he’s bracing for US economic ‘hurricane’ due to inflation

June 1 (Reuters) – Jamie Dimon, chairman and chief executive of JPMorgan Chase & Co (JPM.N) described the challenges facing the U.S. economy as a “hurricane” on the road and urged the Federal Reserve to take drastic measures to avoid tipping the world’s largest economy into recession.

Dimon’s comments come a day after President Joe Biden met with Federal Reserve Chairman Jerome Powell to discuss inflation, which is hovering at 40-year highs. Read more

“It’s a hurricane,” Dimon told a banking conference, adding that the current situation is unprecedented. “Right now it’s pretty sunny, things are going well. Everyone thinks the Fed can handle this. This hurricane is right out there on the road coming our way. We just don’t know if it’s going to happen. is it a minor hurricane or Superstorm Sandy,” he added.

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The Fed is under pressure to make a decisive dent in an inflation rate that is running at more than three times its 2% target and has pushed up the cost of living for Americans. It faces the difficult task of dampening demand enough to dampen inflation without causing a recession. Read more

“The Fed has to deal with this now by raising rates and QT (quantitative tightening). In my opinion, they have to do the QT. They have no choice because there is so much liquidity in the system,” Dimon said.

Major central banks, which are already preparing interest rate hikes in the fight against inflation, are also preparing a joint withdrawal from major financial markets as part of a first-ever round of global quantitative easing that is expected to restrict credit. and add strains to an already slowing global economy. Read more

The battle against inflation has become the focus of Biden’s June agenda amid his declining opinion polls and ahead of November’s congressional election. Read more

Uncertainty over the U.S. central bank’s policy decision, the war in Ukraine, protracted supply chain issues due to COVID-19 and rising Treasury yields rattled global stock markets, the index benchmark S&P 500 (.SPX) falling 13.3% year over year. -Date.

“You have to prepare. JPMorgan is preparing, and we’re going to be very conservative in our balance sheet,” Dimon added.

SOFT LANDING?

The CEO of Wells Fargo & Co (WFC.N) has warned that the Federal Reserve will find it “extremely difficult” to manage a soft landing for the economy as the central bank seeks to put out the fire of inflation with hikes interest rate.

The CEO of America’s fourth-largest lender also said Wells Fargo sees a direct impact of inflation on consumer spending, particularly on fuel and food.

“The soft-landing scenario is … extremely difficult to achieve in the environment we find ourselves in today,” Wells Fargo CEO Charlie Scharf said at the conference.

“If there’s a short recession it’s not that deep…there will be pain as you go through it, overall everyone will be fine out of it,” he added.

Scharf said while overall consumer spending is strong, growth is slowing.

“Businesses are continuing to spend, where they can, they’re increasing inventory…we expect the consumer and ultimately businesses to weaken, which is part of what the Fed is trying to design, but hopefully in a constructive way,” he added.

Recent Fed reports and surveys have found households on average in good financial shape, with working families doing well and unemployment at levels closer to the boom years of the 1950s and 1960s. many low-skilled professions are increasing and bank accounts, on average, are still full of money from coronavirus support programs.

But confidence has declined and, in a recent Reuters/Ipsos poll, the economy topped the list of respondents’ concerns.

“I don’t think our crystal ball versus the macro later this year, 2023, 2024 is necessarily better than the others. Obviously we’re going to see different impacts with Fed actions in different businesses,” said Larry Culp, CEO of GE. , told the conference.

Yet not everyone in corporate America is experiencing a downturn.

“The vast majority of the markets we serve are still quite strong,” said Jim Umplebly, CEO of Caterpillar Inc (CAT.N).

“And our challenge at the moment, quite frankly, is the supply chain, our ability to provide enough equipment to meet all the demand that is out there,” he added.

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Reporting by Elizabeth Dilts, Niket Nishant Additional reporting by Rajesh Singh and Bianca Flowers Writing by Denny Thomas Editing by Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

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