Jamie Dimon, CEO of JPMorgan Chase, said that the banking crisis in the United States is not over and that “there will be a backlash from this crisis for the next few years.” The executive added that the recent bank failures have “significantly changed market expectations” and increased the probability of a recession.
JPMorgan CEO Jamie Dimon on the U.S. economy, recession, and banking crisis
JPMorgan Chase Chairman and CEO Jamie Dimon expressed his concerns about the U.S. economy, recession, and banking crisis in his annual letter to shareholders released last week. The letter follows the recent failures of several major banks in the U.S., including Silicon Valley Bank and Signature Bank. Calling the recent bank failures a “banking crisis,” Dymon warned:
The current crisis is far from over, and even if the crisis passes, the repercussions will continue for years to come.
“Recent events are very different from the global financial crisis of 2008, which hardly affected local banks,” the JP Morgan boss explained. ‘At that time, there was enormous leverage everywhere in the financial system.’ In contrast, he noted: ‘This banking crisis has far fewer financial players and far fewer problems to solve.’
Dymon opined on the Federal Reserve’s efforts to control inflation and future interest rate hikes:
If higher inflation continues for longer, the Fed will be forced to raise rates higher than people expect, despite the recent banking crisis
He also cautioned that quantitative tightening (QT) “will have a continuing impact and may eventually become another force, driving long-term interest rates higher than currently assumed.” This could happen even if there is a mild (or not-so-mild) recession, as we saw in the 1970s and 1980s.”
Dimon explained that the collapse of Silicon Valley Bank and Credit Suisse “changed market expectations dramatically, bond prices recovered dramatically, the stock market fell, and the probability of a market recession increased.”
and stressed:
It is not clear when this current crisis will end, although it will not be like 2008.
Nevertheless, a JP Morgan executive insisted that the current economy is “pretty good,” but reiterated that “there are storm clouds ahead.”
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