JP Morgan currently believes that there is a 35% chance of a recession in the US economy by the end of this year, up from 25% at the beginning of last month.
Zh Tong Finance and Economics APP learned that Jamie Dimon, CEO of JP Morgan, expressed cautious optimism about the prospects for the US economy in a recent interview.
Although the market's optimism about the risk of recession has weakened, Dimon believes that the current uncertainty is still high, including geopolitical factors, the real estate market, fiscal deficits, government spending, quantitative tightening policies, and upcoming elections, all of which may trigger market panic.
Since 2022, Dimon has been warning that the economy faces the risk of a "hurricane", although the performance of the US economy has exceeded his expectations, he pointed out that the rise in credit card default rates indicates that the economy has not completely got rid of the risk of recession. In addition, Dimon is skeptical of the Fed's ability to reduce inflation to its 2% target, considering that inflation may continue to exist in the future due to spending on the green economy and the military.
Nevertheless, Dimon is optimistic about the resilience of the US economy. He believes that even in the event of a mild or more severe recession, the US economy will remain robust, although he also expresses sympathy for the unemployed.
At the same time, Bruce Kasman, chief economist at JPMorgan, and his team pointed out in a report that the weakening of demand in the US labor market exceeded expectations, and early signs of labor outflows have emerged. They predict that the possibility of a US economic recession in the second half of 2025 is 45%.
Kasman said that his assessment of the risk of recession has increased slightly, while his assessment of the interest rate outlook has increased significantly. Currently, JPMorgan expects that the probability of the Fed maintaining high rates in the long term is only 30%, a significant decrease from 50% two months ago.
Another economist at JPMorgan, Michael Feroli, expects that under the pressure of declining inflation, the Fed may cut interest rates by 50 basis points in September and November, and continue to cut interest rates by 25 basis points at subsequent meetings. However, he also mentioned that Fed Chairman Jerome Powell may want to avoid increasing market volatility in the already uncertain summer.
Currently, JPMorgan believes that there is a 35% chance of a recession in the US economy by the end of this year, up from 25% at the beginning of last month. It is worth mentioning that JPMorgan's assessment of the risk of economic recession is similar to Goldman Sachs' prediction, which expects a 25% chance of economic recession in the next year.
Economists from both banks believe that once the US or global economy falls into recession, major central banks will "almost certainly take drastic easing policies".