FX168 Financial News (North America) News Analysts are eagerly awaiting the day Federal Reserve Chairman Jerome Powell announces interest rate cuts, but J.P. Morgan CEO Jmie Dimon (Jmie Dimon) is worried that Wall Street may face an unpleasant surprise.
Dimon is worried that the Federal Reserve may raise interest rates above the current 20-year high rather than lower interest rates.
He said that not only would this cause shock on Wall Street, but the overall economy was not prepared for this decision.
“When we look at risk and interest rates, we don't always guess what the future holds; [we] consider a range of outcomes,” Dimon told CNBC at the J.P. Morgan Global China Summit in Shanghai.
“Do you think interest rates might rise a little bit? Yes, I think so. If so, is the world ready? Not yet.”
This warning is contrary to general consensus.
Earlier this month, Reuters updated an ongoing survey of economists who were asked when they expected the Federal Reserve to start cutting interest rates. According to the survey, nearly two-thirds of economists (70 out of 108) believe that the first rate cut will occur in September, falling to the range of 5.00%-5.25%.
These expectations have changed from the more optimistic outlook a month ago, when 26 economists expected to cut interest rates in July and 4 economists expected to cut interest rates in June. As of May, 11 people still expect interest rate cuts in July, but no one thinks interest rates will be cut in June.
Stubborn inflation
Although Damon's views differ from general consensus — the 68-year-old financial veteran says bankers have been “paralyzed” by a false sense of security — his reasons are not unfamiliar.
“Will inflation be more stubborn than people think? “I think it's more likely than others think,” he explained, “mainly because of massive fiscal and monetary stimulus. These incentives are still in the system and may still drive some of the liquidity, market increases, the price of certain assets, etc.”
“So I'm just being careful.”
Indeed, inflation may not be as obedient as the Federal Reserve would like. The latest data from the US Bureau of Labor Statistics for April showed that the seasonally adjusted consumer price index (CPI) rose 0.3%, while in March it rose 0.4%.
In the 12 months to April, the All Projects Index increased by 3.4%, which is a slight increase from 3.5% in the 12 months ending March.
While some factors favored the Federal Reserve — the Bureau of Labor Statistics reported earlier this month that US employers only added 175,000 jobs in April — Dimon wasn't the first to warn that the Fed's fight against inflation could get worse before it got better.
Last year, Citigroup CEO Jane Fraser (Jane Fraser) (who is at the top of Fortune's Most Influential Women list) explained that if history is taken as an example, curbing the latter half of inflation has always been more difficult than achieving an initial decline.
In October of last year, she said “all the numbers” indicated that the economy would achieve a soft landing, but she added that the latter half of the economic plan was “the tougher part.”
Damon, who recently shocked the market, said he could retire within the next five years, adding that stubborn inflation could lead to what he thought was the “worst” outcome for the US: stagflation.
He added, “I studied a series of results and once again reiterated that the worst outcome for all of us was so-called stagflation, higher interest rates, and a recession. This means corporate profits will drop, and we'll experience it all. I mean, the world has experienced this, but I think the chances of this happening are higher than anyone else thought.”