Ironically, JPMorgan CEO Jamie Dimon, said there is a “hurricane” bearing down on the US economy one week ago. Dimon cited the Fed’s jump in oil prices due to the war in Ukraine and Fed’s interest raise.
Still, Kasman said the real storm isn’t on the horizon. The economist argued that the Fed does not want to strike growth in the near term but may have to raise rates more sharply later on to curb inflation.
Investors expect the Fed to raise interest rates to above 3% by the middle of 2023, according to the CME FedWatch tool, from a range of 0.75% to 1% currently. But Kasman said more might be needed at some point.
“The Fed does not want to create a recession right now,” he said. “The Fed is tolerant of inflation above 2%. So this is gonna take time before we get to the point where the Fed really has to hurt us.”
In the meantime, Kasman said, “the US household sector has every ability to continue to absorb drags from higher inflation.”