'Wall Street Emperor' Dimon: "US Recession Next Year... 5% Interest Rate Also Struggles to Control Inflation"

[Image source=EPA Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Jamie Dimon, CEO of JP Morgan Chase, known as the "Emperor of Wall Street," warned on the 6th (local time) that high inflation would derail the economy and lead to a recession in the United States next year. He also expressed concern that raising the benchmark interest rate to the 5% range might still be insufficient to curb inflation.

Dimon appeared on CNBC's Squawk Box that day and stated, "Inflation is eating everything up."

He began by noting that consumer and corporate conditions have been relatively good recently, evaluating that U.S. consumers saved $1.5 trillion through COVID-19 pandemic relief programs, which allowed them to increase spending by 10% compared to 2021. However, due to high inflation, it is analyzed that even that $1.5 trillion will be depleted by mid-next year.

Dimon expressed concern, saying, "These factors could derail the economy and cause a mild or severe recession as people fear."

This aligns with his earlier warnings since June that "an economic hurricane is coming soon." At that time, Dimon diagnosed that a U.S. recession was inevitable due to soaring inflation, steeper-than-expected benchmark interest rate hikes, unknown effects of quantitative easing (QE), and the prolonged Russian invasion of Ukraine.

Dimon evaluated, "We have not seen this kind of disruption in the world for a long time." However, he said it remains uncertain whether the U.S. recession next year will be mild or severe. He added, "What I said was a hurricane," but also noted, "The storm clouds could ease. As a risk manager, I prepare for both, but I cannot predict what will happen."

In particular, Dimon pointed out that with the Federal Reserve's (Fed) continued high-intensity tightening, the benchmark interest rate is expected to exceed 5% next year, but even this "may not be enough to control inflation." Since the beginning of the year, the Fed has maintained high-intensity tightening and raised the current upper limit of interest rates to the 4% range through an unprecedented four consecutive giant steps (0.75 percentage point increases in the benchmark interest rate).

Having led JP Morgan since 2006, Dimon said, "The U.S. banking system is incredibly sound," and he does not expect a crisis like the 2008 global financial crisis to occur.

Regarding cryptocurrencies, he dismissed them as a "complete sideshow," saying that investors should not waste their time. This statement has attracted more attention following the sharp decline in cryptocurrency prices this year and the recent bankruptcy filing of FTX, one of the world's top three exchanges. Dimon is considered one of the leading cryptocurrency skeptics on Wall Street. He criticized the cryptocurrency industry for being rife with crime and pointed out the need for regulatory authorities to focus on it.