JPMorgan cancels recession call even with ‘very high risk. On Friday, economists at JPMorgan Chase dismissed their calls for a recession. Joining a growing chorus on Wall Street that now believe a downturn is no longer an impossibility. avoid.
While noting that risks remain high and growth ahead is expected to slow. Also, bank forecasters believe the data flow suggests a soft landing is possible. This comes despite a series of rate hikes enacted with the express purpose of slowing the economy and a number of other significant headwinds.
Michael Feroli, the chief economist at the nation’s largest bank, told clients that recent figures point to around 2.5% growth in the third quarter, compared with JPMorgan’s previous forecast for an increase of only 0.5%.
“Given this growth, we suspect that the economy will soon lose enough momentum to slip into a mild recession early next quarter, as we had previously predicted,” Feroli wrote. Along with the positive data, he pointed to the resolution of the debt ceiling deadlock in Congress as well as the origination of the banking crisis in March as potential headwinds that have been eliminated since then.
Additionally, he noted increased productivity, thanks in part to the broader deployment of artificial intelligence and an improvement in labor supply, although hiring has slowed in recent months.
Interest rate risk
However, Feroli said the risk was not entirely out of the question. Specifically, he cited the danger of policy the Fed has made 11 rate hikes since March 2022. Those hikes totaled 5.25 percentage points, but inflation is holding up well. above the central bank’s 2% target. “While a recession is no longer our scenario, the risk of a recession is still very high. One way that risk could materialize is if the Fed continues to raise interest rates,” said Feroli. “Another way that recession risk could materialize is if the usual lagging effects of already in place tightening are held in place.”
Feroli said he doesn’t expect the Fed to start cutting rates until the third quarter of 2024. Current market prices suggest the first cut could happen as early as March 2024, according to data from the CME.
Market prices are also heading for a recession. A New York Fed indicator that tracks the difference between 3-month and 10-year Treasury yields points to a 66% chance of a decline over the next 12 months, according to an update on Friday. The so-called inverted yield curve is a reliable predictor of recession in data from 1959.
However, the mood on Wall Street has changed about the economy.
Earlier this week, Bank of America also issued a call for a recession, telling clients that “recently incoming data has caused us to re-evaluate” forecasts. The company now sees growth this year of 2%, followed by 0.7% in 2024 and 1.8% in 2025. Goldman Sachs also recently lowered the probability of a recession to 20% from 25% previously.
The Federal Reserve’s GDP forecast for June shows year-over-year growth above 1%, 1.1%, and 1.8%, respectively. Chairman Jerome Powell said last week that Fed economists no longer believe a credit crunch will lead to a mild recession this year 카지노사이트.