JPMorgan Chase's Dimon: The U.S. is still likely to fall into recession, with a soft landing probability of up to 40%, and the Fed may not be able to achieve its inflation target

Dimon said that because the United States will increase its investment in the green economy and military in the future, he is "a little skeptical" whether inflation can be reduced to the Fed's target of 2%; factors such as geopolitics and QT still bring a lot of uncertainty to the economy. JPMorgan Chase economists raised the probability of a US recession by the end of this year to 35% on Wednesday.

Dimon, the CEO who has been in charge of JPMorgan Chase for 18 years, still expects that the United States is more likely to fall into a recession than a soft landing. He also believes that although the Federal Reserve may not be able to truly achieve its own inflation target of 2%, the Fed will soon cut interest rates.

In February this year, Dimon said that the market was too optimistic about the prospect of the United States avoiding a recession, and expected a 70% to 80% chance of a successful soft landing, while he expected the probability of success to be only half of this expectation. On Wednesday, August 7, Eastern Time, a media asked Dimon if he had changed his views in February. Dimon replied that he expected the probability of a soft landing to be the same as it was then. In other words, Dimon still believes that the United States has a probability of about 35% to 40% to achieve a soft landing. Recession remains the most likely outcome for Dimon.

Dimon also said he was "a little skeptical" that the Fed could achieve its goal of reducing inflation to 2% because the U.S. will increase its investment in the green economy and military in the future. He mentioned that factors such as geopolitics and QT still bring a lot of uncertainty to the economy. He said:

"There is a lot of uncertainty right now. I have been pointing out that geopolitics, housing, deficits, spending, quantitative tightening (QT), elections, all of these will cause panic in the market."

Dimon added that the Fed may cut interest rates soon, but "I don't think it's as important as others think."

On the day Dimon spoke, JPMorgan economists led by Bruce Kasman predicted in a report to clients that the probability of a U.S. recession by the end of this year is 35%, higher than the 25% they expected at the beginning of last month. By 2025, the second half of next year, they expect the probability of a recession to remain the same as before, at 45%.

The report said, "We have moderately raised our assessment of the risk of a recession, and by contrast, we have made a larger adjustment to our assessment of the interest rate outlook." JPMorgan Chase economists currently believe that the Federal Reserve and other central banks have only a 30% chance of keeping interest rates high for a long time, compared with a 50% chance predicted two months ago.

Wall Street News mentioned that after the U.S. Department of Labor announced last Friday that the number of new non-farm payrolls in July was far lower than expected, several Wall Street institutions adjusted their expectations for the Federal Reserve's interest rate cuts this year.

Among them, Goldman Sachs said that if employment continues to be weak in August, there is a possibility of a 50 basis point rate cut in September. Citi said that interest rates may be cut by 50 basis points in both September and November, and the policy interest rate range will drop to 3% to 3.25% in the middle of next year. JPMorgan Chase also expects interest rate cuts of 50 basis points in September and November, and believes that before the September meeting, the Federal Reserve has reason to make an emergency rate cut between meetings.