JPMorgan Chase & Co. Chief Executive Jamie Dimon says he expects U.S. interest rates to rise above 8% in the next few years as record U.S. debt and ongoing international conflicts complicate the fight to rein in inflation. He warned that it could rise.
“The trillions of dollars we need each year to restructure global trade, to build a green economy, to remilitarize the world, are all inflationary,” Dimon said. annual letter The announcement was made to JPMorgan shareholders on Monday.
Dimon told investors he expects the Fed to avoid a so-called “soft landing” by controlling inflation without causing a recession, but is prepared to prepare for a more alarming outcome. He said there is.
“These markets appear to be pricing in a 70% to 80% chance of a soft landing,” Dimon said in a previously reported letter. wall street journal. “I think the odds are much lower than that.”
“The worst-case economic scenario would be stagflation,” he said, adding that the economy would stagnate, leading to “not just higher interest rates, but higher credit losses, lower trading volumes and more difficult market conditions.” Probably,” he added.
Still, Dimon said JPMorgan, the largest U.S. bank by assets, “will continue to perform at least reasonably well,” noting that the Wall Street giant posted nearly $50 billion in profits last year. did.
Despite the rapid rise in interest rates in recent years, the Fed has not even been able to bring inflation below 3%.
In a reversal from policymakers’ previous statements that there would be three rate cuts this year, Federal Reserve President Michelle Bowman said Friday that rates could rise further.
“While this is not my baseline outlook, I continue to see the risk that if inflation stalls or even reverses, we may need to raise policy rates further at future meetings. ” Bowman said in prepared remarks to a group of Fed watchers. Friday in New York.
“Reducing policy rates too soon or too soon could lead to an inflationary backlash, and further future increases in policy rates would be needed to return inflation to 2% in the long term,” he said. he added. CNBC.
Inflation rose 3.2% in February, according to the latest Consumer Price Index, which tracks changes in the cost of everyday goods and services, but this is also a stubbornly high number and does not prompt interest rate cuts.
Consumer prices have not declined year over year since January 2021, when President Biden’s term began.
The closest the economy came to negative annual growth since President Biden took office was in July 2022, and inflation remains “steady” at a very high 8.5%.
Overall, prices have risen by a staggering 19% since December 2020, the month before Mr. This is despite consistently claiming that it is. [government’s] deficit. “
But the deficit will exceed $1.7 trillion in 2023, according to Treasury data, and the amount has nearly doubled over the course of last year.
Dimon also warned that America’s debt needs to be addressed before it causes a crisis.
“It’s a cliff, we’re looking at a cliff,” Dimon told Fox in January. “In about 10 years, we’ll be going 60 miles an hour.” [toward it]”
Currently, the debt-to-GDP ratio is over 100%, 123% to be exact according to the International Monetary Fund, and is projected to reach 130% by 2035.
Hedge fund billionaire Ken Griffin criticized the U.S. government’s growing debt in his letter to shareholders last week, warning that future generations will be miserable if the U.S. sinks deeper. He warned that he would face consequences.
“The rapid rise in U.S. public debt is a growing concern that cannot be ignored,” Citadel founder and CEO Griffin wrote in his book. End of 2023 Investor Letter It was released last Monday. “We must stop borrowing money at the expense of future generations.”
Historically, the increase in the national debt (currently hovering at $34.58 trillion) has been caused by high unemployment, an associated decline in tax revenues, and increased government spending on economic stimulus. .
“It would be irresponsible for the U.S. government to incur a 6.4% budget deficit when the unemployment rate is hovering around 3.75%,” he said.
