Jamie Dimon warns inflation could drag US into recession next year: 'It could be a hurricane'
JPMorgan CEO warns inflation 'eroding' Americans' savings, likely to cause downturn
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JPMorgan Chase CEO Jamie Dimon on Tuesday warned that stubbornly high inflation could trigger a U.S. economic recession next year as steep prices cause consumer spending to dry up.
Businesses are still in good shape and consumer spending remains strong, with households hoarding $1.5 trillion in excess savings from pandemic relief programs, Dimon said. But he warned that may not last long.
"Inflation is eroding everything I just said, and that $1.5 trillion will run out sometime mid-year next year," Dimon said during an interview on CNBC. "When you are looking that forward, those things very well may derail the economy and cause this mild to severe recession that people are worried about."
The head of the largest bank in the U.S. first sounded the alarm over the state of the economy in early May, citing concerns over inflationary pressures, a hawkish Federal Reserve and the war in Ukraine. He ratcheted up those warnings in June when he said the U.S. was headed for an "economic hurricane" as a result of the Fed's quantitative tightening and the first European war in decades.
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Jamie Dimon, chief executive officer of JPMorgan Chase & Co., during a Bloomberg Television interview in London, U.K., on Wednesday, May 4, 2022. (Photographer: Chris Ratcliffe/Bloomberg via Getty Images / Getty Images)
The economic outlook has clouded further as a result of the Fed's most aggressive rate-hike campaign since the 1980s. The U.S. central bank has embarked on one of the fastest monetary tightening paths in decades as it seeks to wrestle consumer prices that are still running near a 40-year high back to 2%.
Policymakers could ultimately lift interest rates as high as 5% next year, Dimon said, and even "that may not be sufficient."
"I don't think we've seen that kind of turmoil in the global world for a long a while," he said.
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However, Dimon indicated if the U.S. heads for a recession next year, it's still unclear whether it will be a mild or severe downturn.
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"What I said about a hurricane, I said those storm clouds could mitigate," he said. "It could be a hurricane. We simply don't know. As a risk manager, I prepare for both, but I'm not guessing which one's going to happen."
Dimon is among a growing number of influential Wall Street executives and business titans whose opinions on the economy have soured in recent months.
Goldman Sachs CEO David Solomon, Tesla CEO and Twitter chief Elon Musk, Alphabet CEO Sundar Pichai and former Amazon CEO Jeff Bezos have all expressed concerns about the possibility of a recession within the next year.
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"You have to assume that we have some bumpy times ahead," Solomon said Tuesday during an interview on Bloomberg Television. "You have to be a little more cautious with your financial resources, with your sizing and footprint of the organization."