JPMorgan Predicts Fed to Slash Rates by 125 Basis Points by December

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As a seasoned crypto investor with over two decades of experience navigating various economic cycles, I find myself cautiously optimistic about the current market conditions, given the latest insights from JPMorgan’s Global Research Chair, Joyce Chang, and CEO Jamie Dimon.

During an interview on Bloomberg Television on September 16, 2024, Joyce Chang, who holds the position of Global Research Chair at JPMorgan, repeated her belief that the Federal Reserve will reduce interest rates by half a percentage point in their upcoming meeting scheduled for Wednesday. Although there’s ongoing discussion within the financial market, Chang emphasized that her team remains steadfast in their forecast, although she acknowledged that some are contemplating the possibility of a more modest 0.25% reduction. Chang indicated that the attention of many investors has now shifted from the specific size of the rate cut to the general prospects of economic growth in the United States.

Chang conveyed assurance about the 0.5% rate reduction, explaining that the present economic climate allows the Federal Reserve to implement a larger decrease in interest rates. She emphasized lessening inflationary pressures and labor market conditions as crucial factors justifying this action. Chang proposed that the Federal Reserve’s current monetary policy approach is still somewhat restrictive but can accommodate a larger cut without causing another surge in inflation. Lastly, she suggested that the Fed’s stance would probably lean towards being “fairly accommodative” regardless of the size of the rate adjustment.

When asked if the Federal Reserve may be lagging in its monetary policy adjustments, Chang acknowledged that this topic remains under discussion. Yet, she tried to alleviate worries about the job market, stating that consumer demand continues to be strong and there hasn’t been a massive spike in job losses. Chang anticipates another 0.5 percentage point reduction in November rates, followed by a 0.25 percentage point cut in December. This suggests that JPMorgan foresees the Fed embarking on an extended cycle of monetary easing.

Moving forward, Chang brought up possible issues as we approach 2025, with a focus on the outcome of the U.S. elections. She expressed doubt about whether inflation rates would keep falling considering the current fiscal policies being discussed.

As reported by CNBC, JPMorgan Chase CEO Jamie Dimon has expressed concern about the potential for stagflation, despite indications that inflation might be easing. During a conference at the Council of Institutional Investors in Brooklyn last Tuesday, Dimon warned that the most unfavorable scenario for the economy would be stagflation, which is characterized by both recession and high inflation. He cautioned that while it’s not certain, stagflation should not be dismissed as an unlikely possibility.

In my opinion, we might experience a challenging situation called stagflation, which includes economic recession and increased inflation. Let me add that this possibility should not be dismissed.

According to CNBC, Dimon’s remarks were made at a time when investors are primarily concerned about a potential slowdown in economic growth. The latest inflation figures seem to indicate that prices might be nearing the Federal Reserve’s 2% benchmark, but there have been signs of decline in employment and manufacturing sectors. CNBC underlines that these conflicting indicators are causing market apprehension.

Jamie Dimon has voiced worries about potential inflation in the future, pointing out rising government deficits and increased public spending on infrastructure as contributors that could intensify inflation. He predicts these factors will keep inflationary concerns relevant for several years ahead. Furthermore, he referenced his August comments where he estimated the probability of a gentle economic transition (a “soft landing”) to be around 35% to 40%, implying a higher likelihood of an economic recession occurring instead.

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2024-09-16 16:01