U.S banks warn of recession amid high inflation

STORY: Shares of the biggest U.S. banks fell sharply on Wednesday, a day after a lineup of the country's top bankers said they were bracing for a worsening economy next year as inflation threatens the spending power of American consumers.

JPMorgan Chase CEO Jamie Dimon told CNBC on Tuesday that consumers and companies are in good shape at the moment, but that may not last much longer, adding that a slowing economy and inflation might very well cause "a mild to hard recession."

Dimon said excess savings held by consumers from stimulus programs approved by Congress beginning in 2020 may run out some time in mid-2023.

Dimon also said the Federal Reserve may pause for three to six months after raising interest rates, but that those higher rates may "not be sufficient" to tame high inflation.

Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that the bank's research shows "negative growth" in the first part of 2023, but that the contraction will be "mild."

And Goldman Sachs CEO David Solomon said at the same conference that "economic growth is slowing," adding that when he talks to clients, "they sound extremely cautious."

Meanwhile, some banks including Goldman and Citigroup are cutting jobs. On Tuesday, a source told Reuters that Morgan Stanley has reduced about 2% of its workforce, affecting about 1,600 positions.