Damon says the goal of the US economic “hurricane” is due to inflation

June 1 (Reuters) – Jamie Dimon, Chairman and CEO of JPMorgan Chase & Co (JPM.N) He described the challenges facing the US economy as a “hurricane” on the way and urged the Federal Reserve to take strong action to avoid pushing the world’s largest economy into recession.

Dimon’s comments come a day after President Joe Biden met Federal Reserve Chairman Jerome Powell to discuss inflation, which is hovering at its highest levels in 40 years. Read more

“It’s a hurricane,” Dimon said at a banking conference, adding that the current situation was unprecedented. “Right now it’s kinda sunny, things are going well. Everyone thinks the Fed can handle this. This hurricane is all the way coming our way. We don’t know if it’s a minor hurricane or superstorm Sandy,” he added.

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 the difficult task of dampening demand enough to curb inflation while not causing a recession. Read more

“The Fed has to do with this now with rate hikes and QT (quantitative tightening). In my opinion, they have to do QT. They don’t have a choice because there is a lot of liquidity in the system,” Dimon said.

Major central banks, already planning to raise interest rates in the fight against inflation, are also preparing for a joint withdrawal from major financial markets in the first-ever round of global quantitative tightening expected to tighten credit and increase pressure on an already slowing global economy. Read more

The inflation battle has become the focal point of Biden’s June agenda amid sagging opinion polls and ahead of November’s congressional elections. Read more

Uncertainty over US central bank policy, the war in Ukraine, a prolonged supply chain due to COVID-19 and rising Treasury yields have rocked global stock markets, with the benchmark S&P 500 index (.SPX) It’s down 13.3% year-to-date.

“You have to brace yourself. JPMorgan is preparing ourselves, and we’re going to be very conservative on our balance sheet,” Dimon added.

soft landing?

Wells Fargo & Co (WFC.N) The CEO warned that the Federal Reserve would find it “extremely difficult” to manage a soft landing in the economy as the central bank seeks to quell the inflation fire by raising interest rates.

The CEO of the fourth largest lender in the United States also said that Wells Fargo is seeing a direct impact from inflation on consumer spending, particularly on fuel and food.

“The easy landing scenario … is very difficult to achieve in the environment we are in today,” Charlie Scharf, CEO of Wells Fargo, said at the conference.

He added, “If there’s a short recession, it’s not all that deep… There will be some pain as you go through it, in general, everyone will be OK to get out of it.”

Scharf said that while overall consumer spending is solid, growth is slowing.

He added: “Businesses are still spending, they can build up stocks…We expect the consumer and businesses will eventually weaken, which is part of what the Fed is trying to engineer but hopefully in a constructive way.”

Recent reports and surveys by the Federal Reserve have reported that households are, on average, in a strong financial position, with working families doing well, and unemployment at levels closer to the boom years of the 1950s and 1960s. The wages of many low-skill occupations are rising, and bank accounts are still, on average, full of cash from coronavirus support programs.

But confidence waned, and in a recent Reuters/Ipsos poll, the economy topped the list of respondents’ concerns.

“I don’t think our crystal ball for macro later this year, 2023, 2024 is necessarily better than others. Obviously, with Fed actions we’ll see different effects in different businesses,” GE CEO Larry Culp , he told the conference.

However, not everyone in corporate America is seeing a slowdown.

“The vast majority of the markets we serve are still very strong,” Caterpillar Inc (CAT.N) CEO Jim Umplebly said.

“The challenge we are facing right now, quite frankly, is the supply chain, our ability to provide enough equipment to meet all the demand that exists,” he added.

Additional reporting by Elizabeth Dilts and Nikit Nishant Additional reporting by Rajesh Singh and Bianca Flowers.

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