JPMorgan Chase raises the probability of the US economy falling into recession by the end of the year, expecting rate cuts of 50 basis points in September and November respectively

JPMorgan Chase now believes that there is a 35% chance of the U.S. economy falling into a recession by the end of this year, up from 25% at the beginning of last month.

The U.S. news "suggests weakening labor demand beyond expectations and early signs of layoffs," JPMorgan Chase economists led by Bruce Kasman wrote in a memo to clients on Wednesday. The team believes that the likelihood of an economic recession by the second half of 2025 is 45%.

"We have slightly increased our expectations for recession risks, in sharp contrast to our greater reassessment of interest rate prospects," Kasman and his colleagues wrote. JPMorgan Chase now sees only a 30% chance that the Federal Reserve and its peers will maintain "long-term high interest rates," down from 50% just two months ago.

With the decline in U.S. inflation pressures, JPMorgan Chase expects the Fed to cut interest rates by 50 basis points in September and November.

Goldman Sachs has also reassessed the risk of a recession in the U.S., now estimating a 25% probability of a recession within the next year.

"The realization of a U.S./global economic recession 'almost certainly would lead to rapid central bank easing,'" JPMorgan Chase economists also wrote.

JPMorgan Chase CEO Jamie Dimon expressed doubts about whether inflation can return to the Fed's 2% target, citing risks such as deficit spending and "world remilitarization."

Dimon said in an interview with CNBC in Kansas City on Wednesday that there is still significant economic uncertainty related to factors such as geopolitics and quantitative tightening.

While the Fed may cut rates soon, he added, "I don't think it's as important as others think."

For over a year, Dimon has been warning that inflation may be more persistent than investors expect, and in April's letter to shareholders, he stated that JPMorgan Chase is prepared for interest rates to fluctuate between 2% and 8% or even higher. He said last month, "We have made some progress in reducing inflation, but we still face multiple inflation pressures."

Fed Chair Powell indicated last week that due to the risks of a weak labor market, the Fed may cut rates in September. This concern was underscored last Friday as July's employment data showed a slowdown in hiring and an unexpected rise in the unemployment rate.

Dimon wrote in The Washington Post last week that the next U.S. president should give the private sector "a seat at the table." He did not mention, let alone support, any candidates, and on Wednesday he declined to do so.

He also refused to disclose whether he would consider a cabinet position in the next administration, saying instead, "I love my job."

At 68, Dimon has led JPMorgan Chase for over 18 years, and the question of how long he will continue to lead has long been a concern on Wall Street.

He often jokes that he has five more years until retirement, saying so whenever asked, but in May he told shareholders that the timeline is no longer five years Damon said on Wednesday: "In the end, I have to leave, I know that. Maybe I will serve as chairman for a year or two. There is still some time before I leave the company."