Source: Golden Ten Data

J.P. Morgan CEO Jamie Dimon (Jamie Dimon) said in an annual letter to investors that US inflation may be “more sticky” than the market expected. He warned that US inflation and interest rates may still be higher than market expectations due to excessive government spending.

The head of America's largest bank by assets said in an annual letter to shareholders that J.P. Morgan is ready to raise the Federal Reserve interest rate as high as 8% and as low as 2%.

Dimon wrote, “It's important to note that the economy is driven by massive government deficit spending and past stimulus measures. As we continue to transition to a green economy, restructure global supply chains, increase military spending, and cope with rising health care costs, the need to increase spending is also growing.

“This could lead to more stubborn inflation and higher interest rates than market expectations,” he added.

When Dimon made these remarks on Monday, the financial market's expectations of how many times the Federal Reserve will cut interest rates this year are steadily declining. The market expects the Federal Reserve to cut interest rates twice by 25 basis points in 2024 from the current 23-year high, while the possibility of cutting interest rates for the third time is only 50%. This is a dramatic reversal from the 6 to 7 interest rate cuts expected at the beginning of this year.

In the letter, Dimon also warned that the private credit boom could become an “unexpected risk in the market.” He explained that the rapidly growing industry is full of “very smart and creative” operators, but “not all participants are that good.”

Dimon said, “Problems caused by bad players in the private credit market may spread to high-quality players, even though private credit funds will be locked in for years. “Investors will protest if they feel they are being treated unfairly, and the government will respond by scrutinizing the industry.” He said this is a “reasonable assumption that at some point, regulators will focus on the private market as much as they care about the open market.”

Dimon warned that recent geopolitical events “are likely to present more risks than anything since World War II,” referring to the Russian-Ukrainian conflict and the conflict between Palestine and Israel. “The consequences of these events should also disfigure the idea that 'America can exist in isolation',” Dimon said. “Of course, American leaders must always put America first, but global peace and order are critical to America's interests.”

Regarding artificial intelligence, Dimon said J.P. Morgan is convinced that “the results will be extraordinary” and compared the potential impact of this technology to the impact of printing, electricity, and the internet.

edit/lambor