Will the United States Enter a Recession This Year? JPMorgan Answers

JPMorgan Chase has issued a serious warning about the direction of the U.S. economy, predicting that the economy will enter a recession this year due to the impact of the extensive tariffs announced by President Donald Trump earlier this week. The chief economist of JPMorgan in the United States, Michael Feroli, stated in a note sent to clients that the bank currently expects the U.S. economy to enter a recession and has revised its full-year GDP forecast from a growth of 1.3% down to a decline of 0.3%. Feroli said: “We currently expect real GDP to decline under the weight of tariffs.” “The expected economic downturn will likely suppress hiring and raise the unemployment rate to 5.3% over time.” The market reacted strongly to Trump’s announcement of comprehensive tariffs on U.S. trading partners on Wednesday, causing the S&P 500 to drop to its lowest level in 11 months, erasing $5.4 trillion in market value over two trading sessions. JPMorgan’s downgrade reflects the views of other major banks. Barclays stated on Thursday that it expects a recession in 2025, while Citi’s economists on Friday cut their growth forecast for 2025 down to just 0.1%. Feroli also stated that the Fed will begin cutting interest rates in June and continue until January. Even if inflation is expected to rise, he still anticipates that the benchmark interest rate will decrease to a range of 2.75% to 3% from the current level of 4.25% to 4.5%. JPMorgan forecasts that core inflation will rise to 4.4% by the end of the year from the current level of 2.8%. Feroli describes that outlook as “stagflation,” a rare combination of slowing growth and rising prices that could create a policy dilemma for the Fed. “If so, our forecast for stagnation will create a dilemma for Fed policymakers,” Feroli said. “We believe that significant weakness in the labor market will eventually occur, especially if it leads to weaker wage growth.” Despite increasing pressure, Fed Chair Jerome Powell said on Wednesday that the central bank is not in a hurry to change its policy stance. “It seems there is no need to rush,” Powell said after the release of March employment data showing strong job growth and a slight increase in the unemployment rate to 4.2%.