CEOs of big banks sound the alarm on the fight against inflation: “Expect tougher times for the future”

CEOs of some of the largest US banks sounded the alarm of skyrocketing inflation in a testimony before Congress on Wednesday, warning that price hikes would require further increases in the cost of loans from the Federal Reserve that will slow down lending. economy and will impose widespread financial pain.

Testimony from key banking leaders, including JP Morgan Chase CEO Jaime Dimon and Citigroup CEO Jane Fraser, came just hours before the Federal Reserve is expected to step up its fight against inflation with a dramatic increase in interest rates.

The Fed has instituted a series of aggressive interest rate hikes in recent months as it seeks to curb price hikes by slowing the economy and stifling demand. But the approach risks plunging the United States into an economic recession and putting millions of people out of work.

“We are very concerned about the high prices consumers face in America and indeed around the world,” said Fraser.

The Fed’s continued interest rate hikes will put a damper on economic activity and cause economic hardship, he added.

“The impact of the higher rates needed to try to tame inflation is likely to moderate growth in America and around the world and put pressure on many of the engines of the economy,” he said, adding that the bank “wait[s] hard times that await us “.

President, President and CEO of US Bancorp Andy Cecere, President, President and CEO of The PNC Financial Services Group William Demchak, President and CEO of JPMorgan Chase & Co. Jamie Dimon, CEO of Citigroup Jane Fraser, President and CEO of Bank d ‘ America Brian Moynihan, President and CEO of Truist Financial Corporation William Rogers Jr., and President and CEO of Wells Fargo & Company Charles Scharf were sworn in during a hearing before the House Committee on Financial Services at the Rayburn House Office Building on Capitol Hill , on September 21, 2022 in Washington, DC

Alex Wong / Getty Images

Dimon, which runs the nation’s largest bank, listed the adverse conditions faced by the US economy, including the Russia-Ukraine war, rising oil prices, inflation and rising interest rates.

“These things will absolutely cause the economy to slow down and at some point increase unemployment,” he testified Wednesday.

Last week, the government released a higher-than-expected inflation report that revealed prices had risen slightly in August, worsening cost problems for US households and sending the S& P 500 down for the worst day of 2022.

Speaking at a conservative lecture given by the Cato Institute, Fed Chairman Jerome Powell said earlier this month that the central bank must act “frankly, forcefully” to curb inflation.

The combination of these comments and last week’s inflation data led many economists to expect another 0.75% interest rate hike on Wednesday. Some economists have predicted that the Fed will raise rates by 1%, which it hasn’t done in four decades.

So far, rising rates appear to have slowed key sectors of the economy, for example by raising mortgage rates and slowing down the construction of new homes.

PHOTO: JPMorgan Chase & Co. president and chief executive officer Jamie Dimon testifies during a hearing before the House Financial Services Committee at the Rayburn House Office Building on Capitol Hill on September 21, 2022 in Washington, DC

JPMorgan Chase & Co. President and CEO Jamie Dimon testifies during a hearing before the House Financial Services Committee at the Rayburn House Office Building on Capitol Hill on September 21, 2022 in Washington, DC

Alex Wong / Getty Images

Despite rate hikes, Dimon said the US could avoid an economic downturn, noting the possibility of a “soft landing”, in which the central bank represses inflation but does not cause an economic slowdown.

But the US could instead enter a mild or severe recession and could even face a more severe recession, Dimon said.

“Due to the war in Ukraine and the uncertainty it causes in global energy and food supplies, there is a possibility that it could get worse,” he said.

Offsetting their sobering assessment, senior bank officials said US consumers have achieved a relatively strong financial position that will help them get through potentially tough times.

“The American consumer is actually still in pretty good shape,” Dimon said. “They have a good budget, their debts are low, trust levels are going, jobs are plentiful.”

Fraser, of Citigroup, added: “We are fortunate to have the healthy consumer who enters this.”

Some indicators suggest that the US economy continues to hum.

Hiring in the United States fell from the dizzying pace, but remained solid in August, with the economy adding 315,000 jobs and the unemployment rate rising to 3.7% as more people were looking for work. according to data published by the Bureau of Labor Statistics in early September.

“Inflation is hitting those who can afford it least,” said Andrew Cecere, CEO of US Bank. But, he added on a positive note, “savings levels continue to be above pre-pandemic levels.”

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