Evelyn Reynolds

JPMorgan Chase’s chairman and CEO Jamie Dimon says a “hard landing” for the U.S. cannot be ruled out.
Speaking at the JPMorgan Global China Summit in Shanghai, he told CNBC that the worst outcome for the U.S. economy will be a “stagflation” scenario, where inflation continues to rise, but growth slows amid high unemployment.
Dimon said interest rates could still go up “a little bit.”

JPMorgan Chase’s chairman and CEO Jamie Dimon says a “hard landing” for the U.S. cannot be ruled out.
When asked by CNBC’s Sri Jegarajah about the prospect of a hard landing, Dimon replied: “Could we actually see one? Of course, how could anyone who reads history say there’s no chance?”

The CEO was speaking at the JPMorgan Global China Summit in Shanghai.
Dimon said the worst outcome for the U.S. economy will be a “stagflation” scenario, where inflation continues to rise, but growth slows amid high unemployment.
“I look at the range of outcomes and again, the worst outcome for all of us is what you call stagflation, higher rates, recession. That means corporate profits will go down and we’ll get through all of that. I mean, the world has survived that but I just think the odds have been higher than other people think.”
However, he said that “the consumer is still in good shape” — even if the economy slips into recession.
He pointed to the unemployment rate, which has been below 4% for about two years, adding that wages, home prices and stock prices have been going up.

JPMorgan Chase & Co CEO Jamie Dimon arrives for a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill September 22, 2022 in Washington, DC.
Drew Angerer | Getty Images

That said, Dimon pointed out that consumer confidence levels are low. “It seems to be mostly because of inflation …The extra money from Covid has been coming down. It’s still there, you know, at the bottom 50% it’s kind of gone. So it’s I’m gonna call it normal, not bad.”
Minutes from the Fed’s May meeting released Wednesday showed that policymakers have grown more concerned about inflation, with members of the Federal Open Market Committee indicating they lacked confidence to ease monetary policy and cut rates.

Timing of Fed cuts

Dimon said interest rates could still go up “a little bit.”
“I think inflation is stickier than people think. I think the odds are higher than other people think, mostly because the huge amount of fiscal monetary stimulus is still in the system, and still maybe driving some of this liquidity.”
Is the world prepared for higher inflation? “Not really,” he warned.

According to the CME FedWatch Tool, about half of traders polled are pricing in a 25 basis points cut by September. The Fed has predicted three quarter-percentage cuts throughout 2024, but only if the market allows.
Asked about the prospect and timing of rate cuts, Dimon said that while market expectations “are pretty good. They’re not always right.”
“The world said [inflation] was gonna stay at 2% all that time. Then it says it will go to 6%, then it said it’s gonna go to four … It’s been a hundred percent wrong almost every single time. Why do you think this time is right?”

JPMorgan uses the implied curve to estimate interest rates, he said, adding: “I know it’s going to be wrong.
“So just because it says X, doesn’t mean it’s right. It’s always wrong. You go back to any inflection point of the economy ever, and people thought X and then they were dead wrong two years later,” he said. More

U.K. inflation fell to 2.3% in April, the Office for National Statistics said on Wednesday, coming closer to the Bank of England’s target rate even while missing expectations.
Core inflation, excluding energy, food, alcohol and tobacco, dipped to 3.9% in April from 4.2% in March.

The war between Russia and Ukraine — both major producers of food commodities and energy — has disrupted global production, trade and supply in these areas, leading to a surge in prices.
Solstock | E+ | Getty Images

LONDON — U.K. inflation came in hotter than expected with a drop to 2.3% in April, the Office for National Statistics said Wednesday, prompting traders to pull back from bets on a June interest rate cut from the British central bank.
The headline reading declined from 3.2% in March. The April print marked the first time inflation has been below 3% since July 2021 and brings it within touching distance of the Bank of England’s 2% target.

Economists polled by Reuters had nevertheless expected a steeper drop to 2.1%.
Services inflation — a key measure being watched by the BOE because of the dominance of the sector in the U.K. economy and its reflection of domestically-generated price rises — eased only slightly to 5.9% from 6%. That missed a forecast of 5.5% from both a Reuters poll and the BOE.
Core inflation, excluding energy, food, alcohol and tobacco, dipped to 3.9% in April from 4.2% in March.
A dramatic drop in the headline rate was widely expected because of the year-on-year decline in energy prices. Investors were instead set to focus on core and services inflation, after BOE policymakers indicated they would be willing to cut interest rates some time in the summer, but stressed that the timing would depend on fresh data.

Following the print, money markets slashed the probability of a June rate cut to just 15%, down from 50% earlier in the day. The likelihood of an August cut was seen at 40%, down from 70%.

June cut ‘unlikely’

Both core and services were “disappointing,” said Suren Thiru, economics director of the Institute of Chartered Accountants in England and Wales.
“Lingering concerns over underlying inflationary pressures mean a June rate cut is unlikely. However, these figures may convince more rate setters to vote to ease policy, providing a signal that a summer rate cut is still possible,” Thiru said in a note.
That positions the European Central Bank as potentially the next major central bank likely to start bringing down rates, as its policymakers continue to suggest it would take a big shock to prevent a June cut. Members of the U.S. Federal Reserve have meanwhile struck a significantly more hawkish tone in recent weeks, pushing back market expectations for a cut stateside until after September at the earliest.
Paul Dales, chief U.K. economist at Capital Economics, said the latest inflation data has made a June rate cut from the Bank of England unlikely, and “casts some doubt over August too.”
That is particularly due to the high services figure, Dales said in a note, which “suggests the persistence in domestic inflation is fading even slower than the BOE had assumed.”
U.K. Prime Minister Rishi Sunak said on social platform X that “inflation is back to where it should be.”
Sunak’s ruling Conservative Party has been hoping for signs of an improving economic environment, as it lags in the polls ahead of a national election that must take place before the end of January 2025. The U.K. economy exited a shallow recession in the first quarter of the year, recording 0.6% growth.
BOE Governor Andrew Bailey has stressed that the central bank will remain politically independent in deciding the timeline of the next rate cut, irrespective of the forthcoming election. More

Federal Reserve officials appear to have “no idea” what is happening when it comes to the inflation picture in the U.S., GAM’s Julian Howard told CNBC.
Policymakers have in recent days and weeks been suggesting that inflation remains too high and has fallen by less than previously expected, urging patience when it comes to interest rate cuts.
“Inflation is notoriously difficult to predict and I don’t think they have any real idea what’s happening,” Howard said.

The Marriner S. Eccles Federal Reserve building during a renovation in Washington, DC, US, on Tuesday, Oct. 24, 2023.
Valerie Plesch | Bloomberg | Getty Images

Federal Reserve officials appear to have “no idea” what is happening when it comes to the inflation picture in the U.S., according to Julian Howard, lead investment director of multi-asset solutions at GAM.
His comments come as policymakers have in recent weeks been urging patience over interest rate cuts, arguing that inflation has fallen by less than previously expected and is still too sticky for the Fed to press ahead with easing monetary policy.

“I think the message that’s coming through is that they have no idea what’s going on,” Howard said on CNBC’s “Squawk Box Europe” on Wednesday.

The Fed declined to comment.
Fed Governor Christopher Waller on Tuesday said that he needed to see further data evidence that inflation was softening before supporting rate cuts.
“In the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” he said at an event at the Peterson Institute for International Economics in Washington.
Waller’s comments were echoed by other Fed officials on Tuesday, including Boston Fed President Susan Collins.

“I think the data has been very mixed … and it’s going to take longer than I had previously thought,” she said at a conference hosted by the Atlanta Federal Reserve. “We’re in a period when patience really matters.”

‘A credibility problem’

But Fed officials have not come out with a clear message about their expectations or to address why inflation remains elevated, GAM’s Howard said.
“Inflation is notoriously difficult to predict and I don’t think they have any real idea what’s happening,” he noted.
“To be honest, there’s a credibility problem,” Howard said.
Policymakers initially suggested inflation would be subdued when it first started rising, Howard said, explaining that the rate then spiked.
“And now [policymakers] think inflation is coming down but its not coming down fast enough,” he said.
Data released earlier this month showed that the U.S. consumer price index came in at 3.4% for April on an annual basis. This was a slight dip from March’s 3.5% figure, and far below the 9.1% reading recorded in June 2022 when the inflation cycle peaked — but also remained above the Fed’s 2% target.

“Inflation did start coming down but then it seems to have just got stuck at around 3.5% and everyone is trying, is struggling to find a narrative to why’s it got stuck at 3.5% and I think that’s, that’s the challenge,” GAM’s Howard said.
He added that stock markets appear to be handling the elevated inflation levels and have also adjusted their expectations for interest rate cuts to now price in far fewer than earlier in the year.
Howard attributes the subdued reaction from markets to changes among mega-cap stocks. Those companies currently have high cash levels, which can be invested relatively risk-free, for example in short-term Treasury bills, he explained.
“They’ve become this sort of all-weather type structure at the top of the market,” Howard said. “If rates come down, it’s great for the revenue. … If rates go up, or they don’t come down as expected, it doesn’t matter because [of] the cash level, the cash levels mean that they’re making this huge amount of money on an annual basis risk-free.” More

Economists see the latest U.K. inflation print, out Wednesday, taking the headline rate near or even below the Bank of England’s 2% target.
That is largely due to energy prices, which fell sharply in April.
Markets remain divided on the chance of a June interest rate cut, and the level of services inflation may be key.

A shopper selects fresh produce from a market stall in the Kingston district of London, UK, on Monday, May 20, 2024. 
Bloomberg | Bloomberg | Getty Images

LONDON — U.K. inflation could be about to hit a major milestone, with some forecasting that a sharp fall in the April print will take the headline rate below the Bank of England’s 2% target.
That would represent a plunge from the current level of 3.2% and could “make or break” a June interest rate cut, economists say.

The decline will largely be driven by the energy market, after the regulator-set cap on household electricity and gas bills came down by 12% at the start of April.
A reading below 2% on Wednesday would be the lowest headline inflation rate since April 2021, and a cooling from the peak of 11.1% hit in October 2022 — when U.K. price rises were among the most severe of all developed economies.
The country has been hit by a range of inflationary pressures, including a persistently tight labor market, weakness in the currency increasing the cost of imports, and steeper rises in gas bills than were seen elsewhere.

‘Momentous’

Ashley Webb, U.K. economist at Capital Economics, said that if the headline rate does fall below 2% in April, as he expects, it would be “momentous.”
“This will be crucial in determining whether the first interest rate cut from 5.25% will happen in June (as we expect) or in August. What’s more important is what happens next. We think inflation will fall further, perhaps even to 1.0% later this year,” Webb said in a Friday note.

A Reuters poll of economists puts the headline estimate slightly higher, at 2.1%.
The Bank of England held interest rates steady at its May meeting, as policymakers sent out signals they were preparing for a rate cut in the summer but declined to zero in on June — as those at the European Central Bank have done.
BOE Governor Andrew Bailey said the latest figures were “encouraging,” but that releases ahead of its June 20 meeting, including two consumer price index prints and two sets of wage growth data, would be crucial.

BOE Deputy Governor Ben Broadbent said in a Monday speech that if inflation continues to move in line with forecasts, it is “possible Bank Rate could be cut some time over the summer.”
As of Tuesday, money market pricing continued to indicate only around a 50% probability of a June cut, rising to 73% in August.

Market overreaction?

Economists at ING see inflation coming in “within a whisker” of 2% in April, but dipping below it in May and staying there for most of the remainder of the year. That is well below the BOE’s own forecast for the rate to be closer to 3% at the end of the year.
“If we’re right, then that should be a recipe for several rate cuts this year. We expect at least three, which is slightly more than markets are pricing. But in the very short term, there’s still some uncertainty over services inflation,” James Smith, ING’s developed markets economist, said in a note Monday.
The most recent inflation print for March showed the core figure, which excludes energy, food, alcohol and tobacco, at 4.2%; and services inflation, a key metric for the BOE, at 6%.

Services inflation is forecast at 5.5% for April.
There is a chance the market will “overreact” to a low headline print on Wednesday, Jane Foley, head of FX strategy at Rabobank, told CNBC by email.
“Both the core and the services inflation number could have greater relevance for the timing of the first rate cut of the cycle. On the assumption that services inflation will still be elevated, the Bank could play a cautious hand and still delay a rate cut until August,” Foley said. More