Jamie Dimon warns it's too early to declare victory against inflation
JPMorgan Chase CEO says Fed may need to raise interest rates above 5%
JPMorgan CEO Jamie Dimon shares his outlook for wage inflation in 2023
FOX Business host Maria Bartiromo sat down with JPMorgan Chase & Co. CEO Jamie Dimon to discuss the current state of the U.S. economy.
JPMorgan Chase CEO Jamie Dimon cautioned against prematurely declaring victory in the fight against painfully high inflation, warning the Federal Reserve could raise interest rates higher than expected if price pressures prove to be "sticky."
His comments come amid growing signs of underlying inflation in the U.S. economy – including the blowout January jobs report – that have prompted many traders to reexamine their rate-hike expectations for the year, with some investors betting the Fed could raise rates as high as 6% by the end of 2023.
"People should take a deep breath on this one before they declare victory because a month’s number looked good," Dimon said in an interview with Reuters.
FED OFFICIALS SIGNAL INTEREST RATES MAY NEED TO GO HIGHER THAN EXPECTED
The Fed last week voted to raise its benchmark interest rate another quarter percentage point to a range of 4.5% to 4.75% and signaled that a "couple more" increases are on the table this year. But several Fed officials took a more hawkish stance this week, indicating the central bank has a ways to go in the effort to get inflation back to 2%.
Jamie Dimon, chief executive officer of JPMorgan Chase & Co., during a Bloomberg Television interview in London, U.K., on Wednesday, May 4, 2022. (Photographer: Chris Ratcliffe/Bloomberg via Getty Images / Getty Images)
That's because the hiring surge in January has complicated the Fed's fight to lower prices and tame inflation, some of which stems from the imbalanced labor market. Employers added a whopping 517,000 new jobs last month – nearly triple what Wall Street expected – while the unemployment rate dropped to 3.4%, a rate not seen since May 1969. The Labor Department also revised the job figures in November and December higher, suggesting the economy entered the new year with more momentum than initially thought.
"It’s perfectly reasonable for the Fed to go to 5% and wait a while," Dimon said. But if inflation stalls around 3.5% to 4%, the central bank "may have to go higher than 5%, and that could affect short rates, longer rates."
RETAIL SALES TUMBLE 1.1% IN DECEMBER AS HIGH INFLATION SQUEEZES AMERICANS
Inflation as measured by the Fed's preferred gauge rose 5% in December from the previous year and 0.1% over the course of the month. While that marks a big decline from a peak of 7%, the data still points to inflation that is running well above the Fed's preferred 2% target, a troubling sign as the central bank is already hiking interest rates at the fastest pace in decades.
A customer shops at a supermarket in Millbrae, California, the United States, Aug. 10, 2022. ((Photo by Li Jianguo/Xinhua via Getty Images) / Getty Images)
Projections from the Fed's December meeting show that most officials expect rates to peak around 5.1%, which would imply quarter-point increases at their March and May meetings. No officials forecast rate cuts this year.
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Fed Chairman Jerome Powell has repeatedly said that officials are willing to go higher if the data suggests the economy is still too high, a message he reiterated on Tuesday during a question-and-answer session at the Economic Club in Washington, D.C.
"We’re going to react to the data," Powell said. "So, if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than has been priced in."