Despite a generally optimistic outlook for the U.S. markets in the new year, the head of one of the country’s biggest banks is seemingly not convinced the Federal Reserve can achieve a soft landing as a result of their most aggressive rate hike campaign since the 1980s.
During an exclusive interview on "Mornings with Maria" Tuesday, JPMorgan Chase CEO Jamie Dimon warned about the possibility of a looming recession, while comparing the financial state to the turbulent period of 50 years ago when the nation endured a decade of high inflation.
"I look at a lot of things, and forget just economic models for a second, $2 trillion of fiscal deficit, the infrastructure and IRA act, the green economy, the re-militarization of the world, the restructuring of trade are all inflationary," he told host Maria Bartiromo. "And that looks a little more like the 1970s to me."
"So I think there's a chance here that people should be prepared that inflation comes down but then bounces around three [percent] and maybe even bounces up a little bit," he continued, "and those implied curves will change. Are people ready for that? I'm not sure."
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He pointed out that extra COVID money keeping the consumer afloat will run out soon.
"Credit is normalizing, but it's still lower. Stock prices are up. The consumer is in good shape. But the extra money that they got during COVID, trillions of dollars, that's kind of running out… It runs out this year," Dimon explained. "The government has a huge deficit which will affect the markets. But I'm a little skeptical in this kind of Goldilocks scenario."
"It might be [a] mild recession or heavy recession," the CEO added. "I think they did the right thing to raise rates. I think it was a little late, and I think they're doing the right thing just to wait and see what happens... It takes a while to see the full effect of that... but all of those factors may very well push us to recession, as opposed to a soft landing."
A key Federal Reserve Bank of New York survey published Monday shows consumers are bracing for inflation to remain above the central bank’s 2% target rate – just above 3% – down from a high of 7.1% recorded in June 2022.
Policymakers raised the benchmark federal funds rate 11 consecutive times in the span of just 16 months in an attempt to crush stubborn inflation and slow the economy. Officials have hinted they will pivot to cutting rates in 2024 amid signs the economy is gradually cooling, penciling in three rate reductions this year at their latest meeting.
"I'm a skeptic," Dimon said of rate hike predictions. "Obviously, all of us in business have known how to deal with the ups and downs of vicissitudes of the economy. But I do think the crosscurrents are pretty high: the money is running out, rates are high, [quantitative tightening] hasn't happened yet."
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The noted crosscurrents also include geopolitical tensions and the "re-militarization" of the global economy, the CEO pointed out while warning the Ukrainian and Middle Eastern conflicts, respectively, may impact oil, gas, food and other migration prices.
"I put the geopolitical stuff as something you can't look at this year and say that it will not have effect. It may very well. That stuff is about the freedom of the Western world for the next hundred years."
FOX Business’ Megan Henney contributed to this report.
