JP Morgan headquarters, photo: Profimedia Images
JPMORGAN CHASE & CO. The US economy is expected to fall into recession this year, after taking into account the probable impact of the tariffs announced this week by the Trump administration, writes Bloomberg.
“We expect the real GDP to contract under the pressure of the tariffs, and for the whole year we are now waiting for a real increase of the GDP of -0.3%, decreasing from the previous 1.3% estimate,” said the chief economist of the bank, Michael Feroli, in a note to the clients.
“The forecast decrease in economic activity will raise the unemployment rate to 5.3%,” Feroli said.
The announcement of President Donald Trump on Wednesday about the raised tariffs on American trading partners around the world has brought the S&P 500 index to the lowest level of the last 11 months, wiping the market value with 5.4 trillion in just two trading sessions.
The JPMorgan forecast came along with similar changes from other banks, which have reduced forecasts for US growth this year since announcing tariffs. On Thursday, Barclays PLC said that the GDP is expected to contract in 2025, “which is equivalent to a recession.”
On Friday, CITI economists reduced their forecast to increase this year to only 0.1%, and UBS economists have decreased growth estimates to 0.4%.
“We expect US imports from the rest of the world to decrease by more than 20% in the following quarters, bringing imports as a share of GDP to return to the levels before 1986,” said UBS, Jonathan Pingle, in a note sent to customers.
“Stagflationist forecast”
Feroli said that the federal reserve is expected to begin to reduce its reference interest rate in June and continue with discounts at each subsequent meeting until January, bringing the reference indicator within a range of 2.75% to 3%, from the current range of 4.25%-4.5%.
These discounts would take place despite an increase in a key measure of basic inflation to 4.4% by the end of the year, from the current level of 2.8%.
“If it were realized, our trainee forecast would present a dilemma for FED's decision makers,” Feroli wrote. “We believe that despite the weaknesses manifested by the labor market, a spiral prices will not be installed.”
On Friday, Fed President Jerome Powell said that “it seems we don't have to rush” to make adjustments of the interest rates. His comments followed to publish the most recent monthly employment report from the Labor Statistics Office, which showed a robust employment in March, along with a slight increase in unemployment rate, to 4.2%.
