Lessons Learned From JPMorgan’s Economic Forecast for 2023

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JPMorgan Chase
JPMorgan Chase

In a Wednesday note to clients, JPMorgan analysts broke down their economic forecast for 2023. The TL;DR of it was that the US is on a collision course with a recession, and the Fed will have a hard time driving the economy toward anything else.

  1. JPMorgan’s not betting that the Fed can dodge a recession, as they expect policymakers’ rate increases to run further into next year and continue to shrink the economy.

The FOMC still has 100 basis points more of rate hikes to go, in the bank’s view. December will bring a 50 basis-point hike, and then investors should expect 25 basis-point hikes, one in February and another in March. 

“The almost 500bp of expected cumulative hikes is already delivering a commensurate squeeze of financial conditions,” JPMorgan analysts noted. “[W]hich we believe will tip the economy into mild recession later next year.”

Nonetheless, prices remain 7.7% higher year-over-year.

The labor market is one critical variable that policymakers will be eyeing. Remember, more people working and earning means more money being poured into the economy, which means prices will remain high.