JPMorgan Chase has issued a warning about a potential economic downturn in the U.S., linking it to recent tariffs announced by President Trump.
JPMorgan's GDP Forecasts
JPMorgan's chief U.S. economist Michael Feroli stated that the bank now expects the U.S. economy to shrink, revising its full-year GDP forecast from 1.3% growth to a 0.3% contraction. "We now expect real GDP to contract under the weight of tariffs," Feroli noted.
Market Reaction to Tariffs
Following the announcement of tariffs, markets reacted sharply. The S&P 500 plunged to an 11-month low, wiping out $5.4 trillion in market value over two trading sessions.
Economic Outlook and Fed Policy
Feroli also forecasts that the Federal Reserve will begin cutting interest rates in June and continue through January. Core inflation is expected to rise to 4.4% by year-end. "If true, our stagflationary forecast would pose a dilemma for Fed policymakers," he added.
Thus, JPMorgan's warning of a possible recession raises significant questions about the state of the economy and the future policy of the Fed.
