US heading towards recession, JP Morgan Chase chief warns

Historic inflation, interest rates and war in Ukraine among factors likely to contribute to financial crisis

JP Morgan chief executive Jamie Dimon said that the US is heading towards a recession in 2023. EPA

The US and global economy are facing “serious” headwinds and are probably heading for a recession in the next six to nine months, JP Morgan Chase chief executive Jamie Dimon said.

Mr Dimon cited a number of factors — including soaring inflation, the Federal Reserve's aggressive interest rate increases and the war in Ukraine — as to why he believes the US will be plunged into a financial crisis by the middle of next year.

“These are very, very serious things which I think are likely to push the US and the world — I mean, Europe is already in recession — and they’re likely to put the US in some kind of recession six to nine months from now,” Mr Dimon said told CNBC on Monday.

The warning comes as the International Monetary Fund cut its growth forecast for 2023 and warned of a cost-of-living crisis as the global economy continues to be affected by the war in Ukraine, broadening inflation pressures and a slowdown in China.

“The likely place you’re going to see more of a crack and maybe a little bit more of a panic is in credit markets, and it might be ETFs [exchange-traded funds], it might be a country, it might be something you don’t suspect,” Mr Dimon said.

“If you make a list of all the prior crises, sitting here we would not have predicted where they came from, though I think you could predict this time that it probably will happen. So if I was out there, I’d be very cautious. If you need money, go raise it.”

Mr Dimon said the S&P 500, down nearly 25 per cent this year, “may have a ways to go” in its decline.

“The next 20 per cent will be much more painful than the first,” he said.

In an effort to tamp down on inflation, the Fed has taken unprecedented action by enacting interest rate rises of 75 basis points in three successive meetings. Last month's decision brought the central bank's short-term interest rate to 3-3.25 per cent.

The Federal Open Market Committee indicated that it was willing to raise its benchmark rate to 4.4 per cent by year's end, signalling that more interest rate increases are coming. But Mr Dimon said further action will hurt businesses.

“Rates going up another 100 basis points are a lot more painful than the first 100 because people aren’t used to it,” Mr Dimon said.

Recent government figures have shown that the US reported modest job growth last month, and though numbers were down from August, it was still strong enough to deter the Fed from easing off on its interest rate increases.

And consumer prices rose by 8.3 per cent in August, showing that consumers in the country are still facing higher costs of goods. The Bureau of Labour Statistics is expected to release the Consumer Price Index for the month of September on Thursday.

Bloomberg contributed to this report