June 1 (Reuters) – Jamie Dimon, President and CEO of JPMorgan Chase & Co (JPM.N), described the challenges facing the US economy as a “hurricane” along the way and urged the Federal Reserve to take strong measures to prevent this. turning the world’s largest economy into a recession.
Dimon’s comments come a day after President Joe Biden met with Federal Reserve Chairman Jerome Powell to discuss inflation, which is around 40-year highs. Read more
“It’s a hurricane,” Dimon told a bank conference, adding that the current situation is unprecedented. “Right now, it’s a little sunny, things are going well. Everyone thinks the Fed can handle this. This hurricane is right there at the end of the road for us. We just don’t know if it’s minor or the super storm Sandy,” he added.
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The Fed is under pressure to make a decisive impact on an inflation rate that exceeds three times its 2% target and has caused a jump in the cost of living for Americans. It faces a difficult task of dampening demand enough to curb inflation without causing a recession. Read more
“The Fed has to deal with that now with rising rates and QT (quantitative easing). In my opinion, they have to do QT. They have no choice because there is a lot of liquidity in the system,” Dimon said. .
Major central banks, already planning interest rate hikes to fight inflation, are also preparing a joint withdrawal from major financial markets in a first round of global quantitative easing that is expected to constrain credit and add stress. to a world economy that is already slowing down. Read more
The battle for inflation has become central to Biden’s June agenda amid his fallen opinion polls and before the November congressional elections. Read more
Uncertainty about the political movement of the US central bank, the war in Ukraine, the prolonged thicknesses of the supply chain due to COVID-19 and the higher yields of the Treasury have shaken global stock markets, with the index of reference S&P 500 (.SPX) falling 13.3% year-on-year. -data.
“You have to prepare. JPMorgan is preparing us and we will be very conservative in our balance sheet,” Dimon added.
Soft landing?
Wells Fargo & Co (WFC.N) CEO warned that the Federal Reserve would find it “extremely difficult” to manage a soft landing of the economy as the central bank tries to put out the fire of inflation with rising interest rates. interest.
The CEO of the fourth-largest U.S. lender also said Wells Fargo is seeing a direct impact of inflation on consumer spending, especially on fuel and food.
“The scenario of a soft landing is … extremely difficult to achieve in the environment we find ourselves in today,” Wells Fargo CEO Charlie Scharf told the conference.
“If there is a brief recession, this is not so deep … there will be a bit of pain as you go through it, in general, everyone will be fine to get out of it,” he added.
Scharf said that while overall consumer spending is strong, growth is slowing.
“Corporations are still spending, where they can increase inventories … hopefully the consumer and ultimately the business will weaken, which is part of what the Fed is trying to design, but hopefully in a constructive way.” , added.
Recent Fed reports and polls show that on average households were in a solid financial position, with families working well and unemployment at levels more similar to the boom years of the 1950s and 1960s. Less skilled jobs are on the rise and bank accounts, on average, are still full of cash from coronavirus support programs.
But confidence has waned, and in a recent Reuters / Ipsos poll, the economy topped the list of concerns of respondents.
“I don’t think our crystal ball in relation to the macro at the end of this year, 2023, 2024 is necessarily better than others. Clearly we will see with the Fed’s actions different impacts on different businesses,” Larry Culp CEO of GE. , he told the conference.
However, not everyone in American companies is experiencing a slowdown.
“The vast majority of the markets we serve are still quite strong,” said Jim Umplebly, CEO of Caterpillar Inc. (CAT.N).
“And our challenge right now, frankly, is the supply chain, our ability to supply enough equipment to meet all the demand out there,” he added.
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Report by Elizabeth Dilts, Niket Nishant Additional report by Rajesh Singh and Bianca Flowers Written by Denny Thomas Edited by Nick Zieminski
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