Risk of recession in US remains, Fed should hold rates, says JPMorgan CEO Jamie Dimon

The risk of recession in the United States remains, even as the economy is “kind of booming”, said Jamie Dimon, the chief executive officer of JPMorgan Chase & Co, while speaking at the Australian Financial Review Business Summit in Sydney on March 12.

The US Federal Reserve should hold the key lending rates till there is more clarity on the economic indicators, Dimon added. The Fed, which has kept the benchmark rates unchanged at 5.25-5.5% in four consecutive monetary policy meetings, is expected to start reducing the rates in the months to come.

The economic indicators have been distorted in the post-COVID-19 period, the top banker said, adding that the Fed should observe the indicators for more clarity before embarking on the rate cuts.

Even if they hold the rates for now, the Fed can later “cut it quickly and dramatically”, Bloomberg reported Dimon as saying. He pointed out that unemployment currently remains low in the US, whereas wages are on the upward trend.

The JPMorgan CEO noted that he would not put the prospects of a recession in the US “off the table”. His remarks are slightly different from the optimistic outlook of the American economy he has been sharing in the recent period.

When will the Fed cut rates?

While the Fed left rates unchanged in its last policy review meeting on January 31, its chief Jerome Powell has suggested that the much-anticipated rate cuts are around the corner.

The rate cut action has been linked to the rate of inflation, with the Fed expected to finally slash the rates after the pace of consumer inflation slips to its target of 2%.

“We’re waiting to become more confident that inflation is moving sustainably at 2%...When we do get that confidence — and we’re not far from it — it’ll be appropriate to begin to dial back the level of restriction,” Fed chief Jerome Powell said on March 7, while responding to the queries of the Senate Banking Committee.