JPMorgan’s Dimon wary of U.S. stagflation risk

JPMorgan Chase & Co. CEO Jamie Dimon cautioned that the U.S. risks real stagflation and supported the Federal Reserve’s decision to maintain the current rates. Dimon said this is no time for complacency, even as geopolitical tensions rise amid mounting deficits. 

The JPMorgan Chase & Co. CEO disagreed with the notion that the U.S. is “in a sweet spot,” adding that the U.S. Federal Reserve is doing the right thing to wait and see before it decides on monetary policy.

Fed officials have continued to hold interest rates steady this year amid a solid economic backdrop and uncertainty about government policy changes – like tariffs – and their potential impact on the economy. 

However, the Fed noted earlier this month that there is an increased risk of facing both higher inflation and unemployment, further clouding the U.S. economic outlook as its policymakers grapple with the impact of President Trump’s tariffs.

Dimon sees stagflation’s storm clouds coming for the U.S.

Dimon said he could not rule out a scenario where the U.S. slipped into stagflation, arguing that the country faces significant risks stemming from ongoing geopolitical and fiscal pressures.

Troy Rohrbaugh, the co-CEO of JPMorgan’s commercial and investment banking division, also noted that the institution’s investment banking fees may fall by a percentage in response to these growing uncertainties.

The Fed’s caution about stagflation also reflects the unease over economic policies, especially tariffs, and their longer-term consequences. Dimon’s concerns reinforced that view, suggesting policymakers may face tougher choices ahead of time.

Dimon also drew attention to the country’s growing fiscal imbalances, saying the U.S. has to attack the deficit problems. He added that he understands why investors are likely to pull back from dollar-based assets.

“When I’ve seen all these things adding up that are on the fringes of extreme, I don’t think we can predict the outcome, and I think the chance of inflation going up and stagflation is a little bit higher than other people think.”

–Jamie Dimon, CEO at JPMorgan Chase & Co.

Dimon’s comments came just as House Republicans unveiled a revised version of President Trump’s tax and spending bill, which included higher state and local tax deduction limits.  

Powell says it is unclear if the economy will grow or wilt 

Fed Chair Jerome Powell said it is unclear if the economy would continue its steady pace of growth or wilt under mounting uncertainty and a possible spike in inflation. With so much unsettled about what Trump will ultimately decide and what will survive possible court and political battles, Powell said the scope, the scale, and the persistence of those effects are “very, very uncertain.”

It was Powell’s subtle way of saying the U.S. central bank is effectively sidelined until Trump’s sweeping policy agenda takes full effect.

However, chief U.S. economist at Jefferies Thomas Simons said Powell’s language downplayed just how much disruption had occurred since the Fed’s March 18-19 meeting and how unpredictable the outlook had become.

Powell’s comments notably vouched for the economy’s continued resilience, with job gains continuing and the economy still growing at a “solid pace.” He said the recently reported decline in GDP in the first quarter was “skewed” by a record rush of imports as businesses and households tried to front-run expected import taxes, with measures of domestic demand still growing. But even that data demonstrated the dilemma facing the Fed.

Powell also pointed out that the Fed could not respond until it is clear which way the economy pivots and how it assesses the risks to its two goals of holding inflation to 2% and sustaining maximum employment.

He, however, stressed that the Fed’s current stance on monetary policy leaves it well-positioned to respond in a timely way to potential economic developments, affirming a wait-and-see approach that has become the central bank’s calling card during these first months of the Trump administration.

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