JPMorgan’s CEO Jamie Dimon believes the Federal Reserve could hike interest rates again.
The CEO of JPMorgan, the world’s largest bank, believes markets are in for a bad surprise about interest rates. In an interview with CNBC during the Global China Summit in Shanghai, Jamie Dimon spoke extensively about the future of inflation, interest rates, and the global economy.
Interest rates have remained at their 23-year high of 5.5% since June 2023. At the beginning of 2024, markets expected the Federal Reserve to implement three rate cuts this year. Unfortunately, US inflation has been stickier than expected, forcing the Fed to postpone them.
Now, markets predict only one rate cut will take place in 2024. The Federal Open Market Committee (FOMC) is also extremely nervous about inflation’s direction, the latest meeting’s minutes showed.
April inflation came in at 3.4%. The Fed does not see any stable path toward the 2% inflation target, and there is no reliable prediction of where prices will go next.
During the interview, Dimon pointed out that predictions about inflation have never been right. “The world said [inflation] was going to stay at 2% all that time. Then it says it will go to 6%, then it said it’s going to go to four. ... It’s been 100% wrong almost every single time. Why do you think this time is right?”
The worst outcome
Dimon said he cannot rule out the possibility of another interest rate hike. He warned, however, that the global economy is not ready for that.
The 68-year-old banker said COVID savings are running out, meaning the American consumer is losing the confidence it had until a few months ago.
Indeed, while the US economy fared better than expected in 2023, the new year is showing signs of weakness across the board. Q1 GDP growth was far lower than predicted, with the unemployment level and jobs added also dropping from 2023 levels.
That means the economy is heading down while inflation and interest rates remain up. This is, according to Dimon, the worst possible result. “The worst outcome for all of us is what you call stagflation, higher rates, recession,” he said. “That means corporate profits will go down, and we’ll get through all of that. I mean, the world has survived that, but I just think the odds have been higher than other people think.”
Fed chairman Jerome Powell had previously dismissed fears of stagflation. “I was around for stagflation, and it was 10% unemployment, it was high-single-digit inflation. And very slow growth,” Powell said. “Right now, we have 3% growth which is pretty solid growth, I would say, by any measure. And we have inflation running under 3%. ...I don’t see the ‘stag’ or the ‘flation,’ actually.”
