JPMorgan CEO Jamie Dimon.
Reuters, Mike Theiler
JPMorgan CEO Jamie Dimon warned that inflation is eroding everything even as consumer spending remains robust.
He added that the Fed will have to raise rates to 5% and holding them there for three to six months, but that may not be sufficient.
Geopolitical risks, too, threaten the US economy and could push rates higher, he said.
JPMorgan CEO Jamie Dimon expects the Federal Reserve to hike rates to 5% and hold them there for several months, but warned even that may not be enough to bring inflation back under control.
His forecasts come as residual pandemic savings that have been propping up consumer spending start to run out next year, with Fed rate hikes weighing further
“Inflation is eroding everything I just said, and that $1.5 trillion will run out sometime mid-year next year,” Dimon told CNBC on Tuesday. “So when you’re looking out forward, those things may very well derail the economy, and cause this mild-to-hard recession that people are worried about.”
Comments from Fed Chair Jerome Powell and other central bank officials have left Dimon expecting a peak rate of 5%, which would be the highest since 2007.
He then sees the Fed holding rates at that level for about three to six months, but added, “That may not be sufficient.”
Other risks to the US economy include the central bank’s quantitative tightening campaign, persistent and stubborn inflation, and geopolitical tensions that could worsen oil, food, and humanitarian crises, according to the JPMorgan chief.
“We’ve not had a war in Europe like this since 1945, and back then we said never again,” he said. “Add to that by the way, a lot of emerging market countries that a lot of people don’t focus on are going to pay a heavy price to the strong dollar, higher rates, and higher oil prices. And so that stuff is really significant. I don’t think we’ve seen that kind of turmoil in the global world in a long time.”