Major U.S. banks are preparing for a worsening economy next year as inflation threatens consumer demand.
According to JPMorgan Chase CEO Jamie Dimon, consumers and companies are currently in good shape, which may not last as the economy slows and inflation erodes consumer purchasing power. These things could very well undermine the economy and cause the mild to severe recession that people are worried about, he told CNBC.
Consumers have $1.5 trillion in excess savings from pandemic stimulus programs, but they could run out sometime in the middle of next year, Dimon said. The Federal Reserve may pause for three to six months after raising interest rates to 5 percent, he said, but that may not be "enough" to keep high inflation in check.
The U.S. central bank last month raised rates by 75 basis points to 3.75-4%, but has also signaled that it hopes to move to lower borrowing costs as early as its next meeting.
Bank of America CEO Brian Moynihan told investors at the Goldman Sachs financial conference that Bank of America research shows negative growth in the first half of 2023, but the cuts will be soft.
Economic growth is slowing, Goldman Sachs CEO David Solomon said. Clients seem very cautious, he said. The job market remains surprisingly tight in banking, he said, and competition for talent is tougher than ever.