"Hard to Conclude Inflation Is Under Control"
US Soft Landing Probability Estimated at 35-40%
Jamie Dimon, chairman of JP Morgan Chase and known as the "Emperor of Wall Street," recently maintained his stance that the possibility of a recession cannot be ruled out despite the recent slowdown in U.S. inflation indicators.
On the 10th (local time), Dimon attended an event hosted by the Brooklyn Institutional Investors Council in New York and stated, "Stagflation, where a recession occurs amid high inflation, is the worst-case scenario we could face," adding, "I have not yet taken this possibility off the table."
He pointed to astronomical U.S. fiscal deficits and infrastructure fiscal spending as factors driving inflation. Dimon said, "These factors will continue to exert inflationary pressure for the next several years," and noted, "It is still too early to say we are out of the inflation woods."
Dimon's remarks came amid a sustained slowdown in various U.S. inflation indicators to the 2% range, which has made a rate cut at the upcoming September Federal Open Market Committee (FOMC) meeting highly likely. Dimon has repeatedly expressed concerns that the U.S. economy is heading toward 1970s-style stagflation, characterized by the 'oil shock.' He warned that negative supply shocks, such as a surge in international crude oil prices, could trigger a recession. In an interview last month, he estimated the probability of a soft landing for the U.S. economy at around 35 to 40%.
Recently, the market has evaluated that the Federal Reserve (Fed) has laid the groundwork for a rate cut thanks to favorable U.S. inflation indicators. The July Personal Consumption Expenditures (PCE) price index, favored by the Fed, rose 2.5% year-over-year, confirming stabilization within the target 2% range. The August Survey of Consumer Expectations (SCE) released by the New York Federal Reserve also showed median inflation expectations of 3% one year ahead and 2.8% five years ahead, maintaining a stable level. Investors are now focusing on the August Consumer Price Index (CPI) to be released on the 11th.
Meanwhile, international oil prices plunged on the day amid concerns that China's economic slowdown and the transition to clean energy will lead to weaker oil demand. Brent crude, the global oil price benchmark, closed at $69.19 per barrel for November delivery on the ICE Futures Exchange, down $2.65 (3.69%) from the previous day. This is the first time Brent crude has fallen below $70 since December 2021, nearly two years and nine months ago. On Wall Street, there are even forecasts that international oil prices could plunge to $60 next year.
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