JPMorgan Warns of US Recession, Cuts GDP Growth Forecast to -0.3%

JPMorgan Chase & Co. has issued a warning about the economic implications of the Trump administration's tariff measures. The financial institution has revised its economic outlook for the United States, predicting that the country could enter a recession this year. This revision comes in response to the tariff policies announced by the Trump administration, which are expected to have a significant impact on the U.S. economy.

JPMorgan's economists have lowered their forecast for the year-over-year real GDP growth rate from 1.3% to -0.3%. This downward revision suggests that the U.S. economy is on the brink of contraction, which could lead to an increase in the unemployment rate to 5.3%. The bank's chief economist, Michael Feroli, highlighted that the tariff policies are likely to exert substantial pressure on the economy, potentially pushing it into a recession.

Feroli expects the Federal Reserve to begin lowering its benchmark interest rate starting in June and continue to do so at each subsequent meeting until January of the following year. This would reduce the benchmark interest rate from its current range of 4.25% to 4.5% to a range of 2.75% to 3%. Even if a key indicator of underlying inflation rises from its current level of 2.8% to 4.4% by the end of the year, JPMorgan predicts that the Federal Reserve will still implement these rate cuts.

Feroli noted that if these predictions come true, the resulting stagflation would put Federal Reserve policymakers in a difficult position. He believes that significant weakness in the labor market will ultimately prevail, especially if it leads to a slowdown in wage growth, convincing the committee that a wage-price spiral is unlikely to form.