JPMorgan’s Dimon Warns of Stagflation Threat Worse Than Recession for US Economy

Stagflation Risk Looms

JPMor­gan Chase CEO Jamie Dimon has warned that the US econ­o­my could face an out­come worse than a reces­sion, with the threat of stagfla­tion, a com­bi­na­tion of eco­nom­ic stag­na­tion and high infla­tion, being a real pos­si­bil­i­ty that he would “not take off the table.”

Defining Stagflation

Stagfla­tion is con­sid­ered by econ­o­mists to be a more severe eco­nom­ic con­di­tion than a typ­i­cal reces­sion. It occurs when prices con­tin­ue to rise rapid­ly while unem­ploy­ment increas­es and eco­nom­ic growth slows, cre­at­ing a triple wham­my of prob­lems for con­sumers and the broad­er economy.

Recession vs. Stagflation

In a reces­sion, unem­ploy­ment typ­i­cal­ly ris­es, and the econ­o­my con­tracts, but the sil­ver lin­ing is that infla­tion is usu­al­ly low or nonex­is­tent. Stagfla­tion, on the oth­er hand, brings the worst of both worlds, with high infla­tion per­sist­ing even as the econ­o­my stagnates.

Dimon’s Concerns

Dimon, who has led JPMor­gan Chase since 2006, has turned the bank into the world’s largest and most pow­er­ful, with $4 tril­lion in assets. He expressed his con­cerns about the pos­si­bil­i­ty of stagfla­tion, stat­ing, “I would say the worst out­come is stagfla­tion — reces­sion, high­er infla­tion. And by the way, I would­n’t take it off the table.”

Inflationary Pressures

Dimon point­ed to a range of infla­tion­ary fac­tors that could con­tribute to the risk of stagfla­tion, includ­ing high­er gov­ern­ment deficits, increased gov­ern­ment spend­ing, and the lin­ger­ing impact of sus­tained high­er inter­est rates. 

He warned that these fac­tors could con­tin­ue to exert pres­sure on the econ­o­my, mak­ing it dif­fi­cult to achieve the Fed­er­al Reserve’s 2% infla­tion target.

Soft Landing Challenges

Dimon has pre­vi­ous­ly expressed skep­ti­cism about the like­li­hood of the US econ­o­my achiev­ing a “soft land­ing,” where infla­tion returns to the Fed’s tar­get with­out trig­ger­ing a reces­sion. He believes the odds of this hap­pen­ing are only around 35–40%, imply­ing that a reces­sion is the more like­ly outcome.