JPMorgan's chief economist said on Friday the bank is no longer forecasting a U.S. recession this year and has raised its economic growth estimate as the economy expands at a "healthy pace."

The firm increased its current-quarter real annualized GDP growth estimate to 2.5% from 0.5%, Michael Feroli wrote in a research note on Friday.

"Given this growth, we doubt the economy will quickly lose enough momentum to slip into a mild contraction as early as next quarter, as we had previously projected," the economist wrote.

And while recession risks are still elevated for next year, Feroli said he expects modest, sub-par growth.

Earlier this week, strategists at Bank of America said they no longer forecast a 2024 recession for the U.S. and increased their 2023 economic growth outlook for the country.

JPMorgan's Feroli pointed to items such as the relatively quick resolution of the debt ceiling and regulators’ implicit guarantee of bank depositors during the regional banking crisis earlier this year.

Feroli said this "vastly reduced the odds of a different type of financial crisis risk, although leaving in place the chronic headwind of tighter bank credit."

The economist also cited a pickup in labor supply and hints of improving supply-side performance in second-quarter productivity data, while equity markets are looking for "further productivity gains from greater use of artificial intelligence."

Still, while a recession is no longer his base case, it could materialize if the Fed is not done hiking rates, Feroli cautioned.

And he said it "probably wouldn’t take much of an upside inflation surprise for the FOMC to deliver the extra rate hike that was signaled in the June dots, with perhaps even more to come."

The U.S. will report July consumer price data on August 10.

(Reporting By Sinéad Carew, editing by Deepa Babington)