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JPMorgan Raises US Economic Growth Forecast, Withdraws 2023 Recession Prediction
In a noteworthy shift of perspective, JPMorgan has announced a revision in its forecast for the U.S. economy, indicating a departure from its earlier prediction of a recession in 2023. The bank’s chief economist revealed on Friday that they are now anticipating a more favorable trajectory for the country’s economic growth, a sentiment fueled by the current robust expansion of the economy.
According to Michael Feroli, JPMorgan’s chief economist, the institution has significantly adjusted its estimate for the real annualized GDP growth of the ongoing quarter, upgrading it from a mere 0.5% to a more promising 2.5%. This positive outlook has been underpinned by the economy’s current healthy momentum, which has dispelled concerns of an imminent mild contraction projected for the following quarter.
Feroli highlighted various factors that have contributed to this reassessment, including the resolution of the debt ceiling issue and the assurance provided by regulators to safeguard bank depositors, notably evident during the recent regional banking crisis. These measures have effectively minimized the likelihood of a potential financial crisis, although tighter bank credit remains a persistent challenge. Additionally, Feroli underscored a rise in labor supply and promising indications of improved supply-side performance as gleaned from second-quarter productivity data. As equity markets continue to embrace the potential of artificial intelligence, further productivity gains are anticipated.
While JPMorgan’s stance on the imminent risk of a recession has softened, Feroli sounded a note of caution. He asserted that if the Federal Reserve continues to increase interest rates, there remains a possibility for a recession to materialize. Furthermore, he emphasized the potential impact of an unexpected surge in inflation, which could prompt the Federal Open Market Committee (FOMC) to implement additional rate hikes, potentially exceeding those projected in the June dots. The upcoming release of July consumer price data on August 10 is expected to provide more insights into the inflation landscape.