JPMorgan CEO Jamie Dimon predicts a pause in Federal Reserve rate hikes, but with a caveat for risk asset bulls.
In a new interview on Bloomberg, Dimon, a crypto critic, says pausing rate hikes is probably the right thing to do right now.
However, the CEO says the Fed will likely have to resume interest rates after a pause to curb inflation, which Dimon says will be more stubborn than initially expected.
“My simple opinion is that they are right to pause at this point. There’s been a big increase, about 500 basis points.
Take a break for a second, but I think it’s possible that they need to increase a little more, that inflation is a little stickier. I think people are ready for that, which means rates may have to go up a little bit more. People should be a little bit prepared for that, just like managing your own business should be a little bit prepared for that, whether you’re a finance company or a real estate company.
The other thing I’d be a little bit prepared for is the volatility that could very well be created by quantitative tightening. We’ve never really had quantitative [tightening]. [We’ve had quantitative easing] for the better part of 15 years, and now you’re going to see quantitative tightening, and I think the effects might be a little bit harder than people expect, but hopefully we’ll get through that and we’ll be fine.
In Dimon’s latest annual letter to JPMorgan shareholders, he said the largest US bank is prepared for potentially higher interest rates and higher and longer inflation.
Dimon said assets across the board, including crypto and “meme stocks,” are about to face the consequences of more than a decade of quantitative easing (QE) and the rapid expansion of the money supply.
“This period of QE also led to extraordinary liquidity (and rising money supply) that no doubt drove prices higher across many asset classes – from stocks and bonds to crypto, meme stocks and real estate, among others. Importantly, this also increased bank deposits from $13 trillion to $18 trillion (and the now famous uninsured deposits from $6 trillion to $8 trillion).
QE is now turning into quantitative tightening (QT) as the Fed struggles with inflation.”
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