On Wednesday, JPMorgan chief Jamie Dimon issued another dire warning about the potential long-term impact of the war in Ukraine on the global economy – warning that an escalation of the brutal Russian invasion is a ‘disaster’ potential that could cause an economic downturn.
Dimon indicated that he is more concerned about a possible escalation of the war in Ukraine than growing fears of a recession as the Federal Reserve prepares to raise interest rates to curb inflation.
“Basically, the Cold War is back,” Dimon said in an interview with Bloomberg. “I think the whole world has learned something that we’ve always known – that national security is always the most important thing, but it kind of fades away when we’re all well.”
Dimon claimed there was a “chance” that the Russian-Ukrainian war would last “for years” – an outcome which he said would “completely shake world energy markets, wheat markets, raw materials”.
The bank boss called on the Biden administration and its Western allies to take immediate action to stimulate a “precarious” global energy market – with a focus on ensuring that European nations that have long depended on Russian energy have viable alternatives.
“The Cold War is back,” Dimon repeated. “Allies must merge and not just for military purposes, but for global, economic and strategic investment purposes so that we have a secure world. If we don’t, Ukraine, you could see it all over the world. You could see shapes of chaos.
Dimon’s interview with the outlet surfaced hours before the Fed was set to announce the next phase of its efforts to fight inflation. The central bank is expected to hike its benchmark interest rate by half a percentage point and unveil its plan to shrink its balance sheet by nearly $9 trillion.
Dimon said he believes the Fed is “a bit late” in acting on inflation, which hit a four-decade high of 8.5% in March.
“Remember, two years ago we had 15% unemployment and no vaccine. So I think people should take a deep breath, give them a chance and I think the sooner they get moving the better,” Dimon said.
But even as Dimon laid out his view of the chances of a recession – there’s a 33% chance of America having a “soft landing”, 33% chance of a mild recession and 33% chance of a a severe recession – he moderated his tone and added the economy is currently “very strong” and that consumers are “in great shape”.
Dimon’s comments come less than a month after JPMorgan, the largest US bank, reported disappointing earnings 42% lower than the same period in 2021. At the time, Dimon warned in a statement that ‘there would be “significant geopolitical and economic challenges ahead due to inflation, supply chain issues and the war in Ukraine.
US inflation sits at 8.5%, according to the latest reading from the federal government, its highest level since 1981 and a threat to ordinary Americans when it comes to rising prices at the cash register – and to businesses , which see their profit margins threatened.