Jamie Dimon warns that inflation, wars and Fed policy pose major threats ahead

JPMorgan
Chase
CEO
Jamie
Dimon
warned
Friday
that
multiple
challenges,
primarily
inflation
and
war,
threaten
an
otherwise
positive
economic
backdrop.

“Many
economic
indicators
continue
to
be
favorable,”
the
head
of
the
largest
U.S.
bank
by
assets
said
in

announcing
first-quarter
earnings
results. “However,
looking
ahead,
we
remain
alert
to
a
number
of
significant
uncertain
forces.”

An “unsettling”
global
landscape,
including “terrible
wars
and
violence,”
is
one
such
factor
introducing
uncertainty
into
both
JPMorgan’s
business
and
the
broader
economy,
Dimon
said.

Additionally,
he
noted “persistent
inflationary
pressures,
which
may
likely
continue.”

Dimon
also
noted
the
Federal
Reserve’s
efforts
to
draw
down
the
assets
it
is
holding
on
its

$7.5
trillion
balance
sheet.

“We
have
never
truly
experienced
the
full
effect
of
quantitative
tightening
on
this
scale,”
Dimon
said.

The
latter
comment
references
the
nickname
given
to
a

process
the
Fed
is
employing
to
reduce
the
level
of
Treasurys
and
mortgage-backed
securities
it
is
holding.

The
central
bank
is
allowing
up
to
$95
billion
in
proceeds
from
maturing
bonds
to
roll
off
each
month
rather
than
reinvesting
them,
resulting
in
a
$1.5
trillion
contraction
in
holdings
since
June
2022.
The
program
is
part
of
the
Fed’s
efforts
to
tighten
financial
conditions
in
hopes
of
alleviating
inflationary
pressures.

Though
the
Fed
is
expected
to
slow
down
the
pace
of
quantitative
tightening
in
the
next
few
months,
the
balance
sheet
will
continue
to
contract.

Taken
together,
Dimon
said
the
three
issues
pose
substantial
unknowns
ahead.

“We
do
not
know
how
these
factors
will
play
out,
but
we
must
prepare
the
Firm
for
a
wide
range
of
potential
environments
to
ensure
that
we
can
consistently
be
there
for
clients,”
he
said.

Dimon’s
comments
come
amid
renewed
worries
over
inflation.
Though
the
pace
of
price
increases
has
come
well
off
the
boil
from
its
June
2022
peak,
data
so
far
in
2024
has
shown

inflation
consistently
higher
than
expectations
and
well
above
the
Fed’s
2%
annual
goal.

As
a
result,
markets
have
had
to
dramatically
shift
their
expectations
for
interest
rate
reductions.
Whereas
markets
at
the
beginning
of
the
year
had
been
looking
for
up
to
seven
cuts,
or
1.75
percentage
points,
the
expectation
now
is
for
only
one
or
two
that
would
total
at
most
half
a
percentage
point.

Higher
rates
are
generally
considered
positive
for
banks
as
long
as
they
don’t
lead
to
a
recession.


JPMorgan
on
Friday

reported
an
8%
boost
in
revenue
in
the
first
quarter,
attributable
to
stronger
interest
income
and
higher
loan
balances.
However,
the
bank
warned
net
interest
income
for
this
year
could
be
slightly
below
what
Wall
Street
is
expecting
and
shares
were
off
nearly
2%
in
premarket
trading.