Dimon: "Possibility of a Hard Landing in the US... Worst Case is Stagflation"

"Looking Back at History, Cannot Rule Out Hard Landing"
"Consumers Will Remain Prudent Even in Recession"
On Interest Rate Hike Possibility: "It May Rise Slightly"

Jamie Dimon, CEO of JP Morgan Chase, known as the "Emperor of Wall Street," warned of the possibility of a hard landing for the U.S. economy. He pointed out that in the worst-case scenario, stagflation could occur. However, he reaffirmed his position that even if a recession comes, the impact on consumers will be limited.

According to CNBC on the 23rd (local time), Dimon said at the "JP Morgan Global China Summit" held in Shanghai, China, in response to a reporter's question about the possibility of a hard landing in the U.S., "The possibility is certainly open," adding, "How can anyone who has learned history say it is impossible?"

[Image source=Reuters Yonhap News]

Dimon explained, "When considering the possible outcomes the U.S. economy may face, the worst is stagflation," adding, "This means we all have to endure a period where corporate profits decline." Stagflation is a compound word of stagnation and inflation, referring to a state where high unemployment and rising prices coexist due to economic recession.

However, he said, "I believe the probability of (stagflation) occurring is higher than others think," but also predicted that "(even if a recession occurs) consumers will remain in a healthy state." He based this on the U.S. unemployment rate staying below 4% for nearly two years, as well as recent rises in wages, housing prices, and stocks.

Regarding the Federal Reserve's (Fed) possibility of raising interest rates, Dimon responded, "It can still go up a little bit." He added, "Inflation seems to be more persistent than people think," and pointed out, "The market's expectations for the timing of rate cuts are quite reasonable but have not always been correct."

Meanwhile, the minutes of the May Federal Open Market Committee (FOMC) released the previous day confirmed Fed officials' judgment that recent U.S. inflation slowdown has not shown progress and that it will take longer than initially expected to be confident about rate cuts. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) rate futures market currently reflects about a 60% chance that the Fed will cut rates by 0.25 percentage points or more at the September FOMC meeting.