World’s top investment banker raises alarm over US recession: JP Morgan boss Jamie Dimon warns over inflation and Ukraine war
One of the world’s best-known bankers has warned a recession in the US is ‘absolutely’ possible.
Jamie Dimon, the chief executive of JP Morgan, said inflation and the war in Ukraine were ‘powerful forces’ threatening the economy.
He cautioned that market volatility was inevitable as America’s central bank, the Federal Reserve, tightens its quantitative easing programme and shrinks its balance sheet.
Warning: Jamie Dimon (pictured with wife Judith) said market volatility was inevitable as the Fed tightens its quantitative easing programme and shrinks its balance sheet
Dimon, 66, said: ‘The Fed needs to try to manage this economy and try to get to a soft landing, if possible.
‘I am not predicting a recession. Is it possible? Absolutely.’
His comments came as JP Morgan unveiled its first-quarter results. Profits were down 42 per cent on last year, to £6.9billion, as the deal-making boom began to slow.
Central banks around the world are under mounting pressure to step up the battle against inflation, which has hit a 30-year high of 7 per cent in the UK, a record high of 7.5 per cent in the eurozone, and a 41-year high of 8.5 per cent in the US.
Otmar Issing, the European Central Bank’s (ECB) chief economist when it was created in 1998, slammed the ‘misguided’ response of the bank to the inflation spike, telling the FT: ‘Inflation was a sleeping dragon; this dragon has now awoken.’
Against this backdrop, the Bank of England looks set early next month to raise rates for a fourth time since December.
Ruth Gregory, senior UK economist at Capital Economics, said: ‘We think rates will rise from 0.75 per cent to at least 2 per cent next year.’
The US Federal Reserve is set to act in May having raised rates for the first time in three years last month. The ECB has yet to raise rates.
‘The ECB has contributed massively to this trap in which it is now caught because we are heading towards the risk of a stagflationary environment,’ said Issing.
James Bullard, president of the St Louis branch of the US Federal Reserve, said it must be more aggressive and raise rates far higher than a ‘neutral’ level – estimated to be around 2.5 per cent.
‘There’s a bit of a fantasy, I think, in current policy in central banks,’ he told the FT. ‘Neutral is not putting downward pressure on inflation.’
Pointing to US prices rising by 8.5 per cent, he added: ‘This just underscores the urgency.
‘The Fed is behind the curve and needs to get moving.’