The stock market initially expected multiple rate cuts in 2024. However, as the year progressed, persistent inflation has led the Federal Reserve to reconsider its approach, deciding to maintain current rates with discussions of potential rate hikes gaining traction.
JPMorgan CEO Jamie Dimon believes inflation is more persistent than anticipated and suggests that rate hikes could be necessary, labeling earlier predictions of rate cuts as overly optimistic.
When asked about the possibility of predicting the number of rate cuts this year or future inflation levels, Dimon responded that such forecasts have historically been inaccurate and emphasized that the stock market needs to adapt in real time.
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There is always a chance of a hard landing, according to Dimon
While speaking at the JPMorgan Global China Summit in Shanghai, Dimon stated that a ‘hard landing’ for the U.S. economy cannot be ruled out.
When CNBC’s Sri Jegarajah asked about this possibility, Dimon responded, ‘Could we actually see one? Of course, how could anyone who reads history say there’s no chance?’
Dimon says the worst case for the U.S. would be a stagflation
JPMorgan CEO stated that the worst outcome for the U.S. economy would be a ‘stagflation’ scenario, where inflation continues to rise while growth slows amid high unemployment.
‘The worst outcome for all of us is stagflation: higher rates, recession. This would mean a decline in corporate profits, though the world has survived such conditions. I believe the odds of this happening are higher than many others think.’
However, Dimon also noted that ‘the consumer is still in good shape,’ even if the economy enters a recession. He highlighted that the unemployment rate has remained below 4% for about two years, and wages, home prices, and stock prices have risen.
