Bank of America CEO Brian Moynihan discusses the pace of the economy as the Fed struggles to bring inflation under control in “Cavuto: Coast to Coast.”
A chorus of Wall Street CEOs are sounding the alarm about the situation US economy It got stronger this week as executives sounded warnings about a possible recession in 2023.
Rampant inflation, combined with the most ruthless Federal Reserve in decades, has raised the possibility of a recession next year, according to some of the nation’s best-known CEOs.
JPMorgan Chase CEO Jamie Dimon, Bank of America CEO Brian Moynihan and Goldman Sachs CEO David Solomon all revived their gloomy forecasts of a 2023 recession with a pessimistic tone about the health of the economy.
“You have to realize that we’re going to have some tough times ahead of us,” Solomon said during an interview with Bloomberg Television on Tuesday. “You have to be a little more careful with your financial resources, your metrics and your organization’s footprint.”
THESE BUSINESS TITANS ARE EXCITING THE US ECONOMY
Jamie Dimon, chief executive of JPMorgan Chase & Co., during an interview with Bloomberg Television in London, Wednesday, May 4, 2022. (Photo by Chris Ratcliffe/Bloomberg via Getty Images / Getty Images)
That could mean an increased focus on spending that Goldman already has and a slowdown in hiring.
“This could also be due to pruning in certain areas,” Suleiman added.
Dimon, the head of the largest US bank, echoed that sentiment in an interview with CNBC on Tuesday. While he noted that businesses are still doing well and consumer spending is strong — households are accumulating about $1.5 trillion in excess savings from pandemic relief — that won’t last long.
“Inflation is destroying everything I just said, and that $1.5 trillion will be gone by the middle of next year,” Dimon said. “When you look forward, these things could very well derail the economy and lead to this mild to severe recession that people are worried about.”
David Solomon, chief executive of Goldman Sachs & Co., speaks at the Bloomberg New Economy Forum on Wednesday, Nov. 17, 2021, in Singapore. (Photo: Bryan van der Beek/Bloomberg via Getty Images / Getty Images)
The economic picture has been further clouded by the Fed’s rate hike campaign, the most aggressive in decades as policymakers still struggle to control inflation, which is nearing a 40-year high.
In a worrying development, however, the Fed’s rate hikes have so far failed to tame inflation: The government reported last month that the consumer price index rose 7.7% from a year earlier, well above the Fed’s 2% target in October. This suggests that the Fed will have to continue its aggressive course, raising the possibility that it will crush consumer demand and lead to higher unemployment.
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Policymakers could eventually raise interest rates as high as 5% next year, Dimon said, and even that “may not be enough.”
Dimon has previously warned that the US could be headed for a “hurricane” of high interest rates, inflation and the war in Ukraine; but he declined to say on Tuesday whether he believed the looming recession would be mild or severe.
“What I said about the hurricane, I said these storm clouds are going to soften,” he said. “It could be a hurricane. We just don’t know.”
Federal Reserve Chairman Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee on May 4, 2022, in Washington. (Photo by Al Drago/Bloomberg via Getty Images/Getty Images)
History shows that business titans can be right in predicting recession. A recent study by former Federal Reserve Board vice chairman and Princeton economist Alan Blinder, is defined Since 1965, there have been 11 tightening periods, eight of which have been followed by recessions.
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Still, that doesn’t mean a serious recession is guaranteed. There were five examples of very mild recessions in which GDP fell by less than 1% or no economic recession at all.
Eric Green, Chief Investment Officer of Penn Capital, and John Lonsky, President of Thru the Cycle, discuss the state of the US consumer and the possibility of a recession in 2023 on Mornings with Maria.
Bank of America CEO Brian Moynihan said in an interview with FOX Business’ Neil Cavuto on Tuesday that he predicts the U.S. will enter a recession next year, although he predicts it will be a mild one.
“We’re going to have a shallow recession,” he said. “Ultimately, we have to get inflation under control, and that’s what the Fed is trying to do.”