NEW YORK- The biggest US banks are bracing for a worsening economy next year as inflation threatens consumer demand, according to executives Tuesday.
JPMorgan Chase & Co Chief Executive Jamie Dimon told CNBC that consumers and companies are in good shape, but noted that may not last much longer as the economy slows down and inflation erodes consumer spending power.
“Those things might very well derail the economy and cause this mild to hard recession that people are worried about,” he said.
Consumers have $1.5 trillion in excess savings from pandemic stimulus programs, but it may run out some time in mid-2023, he told CNBC. Dimon also said the Federal Reserve may pause for three to six months after raising benchmark interest rates to 5 percent, but that may “not be sufficient” to curb high inflation.
The US central bank last month raised rates by 75 basis points during its fourth consecutive meeting to 3.75 percent-4 percent, but it also signaled hopes to shift to smaller hikes as soon at its next meeting.
Major banks’ shares fell sharply on the day after a lineup of top bankers outlined the risks for the economy. Bank of America slid more than 4 percent; Goldman Sachs Group Inc and Morgan Stanley each fell more than 2 percent and Citigroup Inc slid more than 1 percent.
