JPMorgan Chase Raises Probability of Imminent US and Global Recession, Abruptly Shifts Forecast on Fed Rate Cuts

JPMorgan Chase is updating its economic outlook amid increasing market turbulence and growing fears of an impending recession.

The bank’s global research division says the US economy is showing signs of a slowdown, pointing to the rising unemployment rate and a weaker-than-expected July jobs report.

In light of the new data, JPMorgan is raising the probability that a US and global recession will happen by the end of the year from 25% to 35%.

“Important elements of our growth forecast are being challenged. US news hints at a sharper-than-expected weakening in labor demand and early signs of labor shedding. The latest business surveys also suggest a loss of momentum in global manufacturing and in the Euro area – weak links in the expansion that we have expected to lift this year.

On the other hand, these forces are being tempered by solid continued gains in overall activity, led by the service sector.”

JPMorgan is leaving its forecast that a recession will happen by the end of 2025 unchanged, at 45%.

Amid the volatility, the banking giant is also changing its forecast on what’s next from the Federal Reserve.

The bank’s analysts now see a 30% chance that the Fed will keep interest rates higher-for-longer, which is down from 50% just two months ago.

“The modest increase in our assessment of recession risk contrasts with a more substantial reassessment we are making to the interest rate outlook. This is driven by the correlated shifts in growth and inflation risk that are shaking the gradualism narrative in current central bank rate guidance. Specifically, there has been a material positive shift in the risk profile on U.S. inflation as strong supply-side performance combines with moderating labor demand to ease labor market pressure.

Taken together, these developments warrant a break from gradualism and we expect the Fed to make a level adjustment in its policy stance that lowers rates by at least 100 basis points through year-end.”

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