JPMorgan CEO Dimon warns of recession next year

JPMorgan Chase CEO Jamie Dimon warned that stubbornly high inflation could lead to a U.S. economic recession next year, as steep prices cause consumer spending to dry up.

Consumer spending remains strong and businesses are still in good shape, with households hoarding $1.5 trillion in excess savings from pandemic relief programs, according to Dimon. He warned that may not last long.

Inflation is eroding everything I just said, and that $1.5 trillion will run out sometime mid-year next year, Dimon said in an interview on CNBC. When you look that forward, those things may very well derail the economy and cause a mild to severe recession that people are worried about. The head of the largest bank in the U.S. first sounded the alarm in early May over the state of the economy, citing concerns over inflationary pressures, a hawkish Federal Reserve and the war in Ukraine. He ratcheted up warnings in June when he said the US was headed for an economic hurricane as a result of the Fed's quantitative tightening and the first European war in decades.

The Fed's most aggressive rate-hike campaign has made the economic outlook clouded further, as the U.S. central bank has embarked on one of the fastest monetary tightening paths in decades, as it seeks to wrestle consumer prices that are still near a 40 year high back to 2%.

The policymakers could lift interest rates as high as 5% next year, but that may not be enough, according to Dimon. He said he didn't think we've seen that kind of turmoil in the global world for a long time.

Dimon said if the US heads for a recession next year, it's still unclear whether it will be a mild or severe downturn.

He said that he said that storm clouds could be mitigated because of what I said about a hurricane. It could be a hurricane. As a risk manager, I prepare for both, but I'm not sure what one's going to happen. Dimon is one of the many influential Wall Street executives and business titans whose views on the economy have soured in recent months.

Goldman Sachs CEO David Solomon, Tesla CEO and Twitter chief Elon Musk, Alphabet CEO Sundar Pichai and former Amazon CEO Jeff Bezos have expressed concerns about the possibility of a recession next year.

Solomon said Tuesday during an interview on Bloomberg Television that they have some bumpy times ahead, and you have to assume that we have some bumpy times ahead. You have to be cautious with your financial resources, as well as your sizing and footprint of the organization.