JPMorgan’s Jamie Dimon says he disagrees with the Fed on inflation being transitory – and once unemployment hits 4.5%, the central bank will start tapering

Jamie dimon jpmorgan
  • JPMorgan CEO Jamie Dimon said he doesn’t see current high US inflation as temporary, speaking to Fox Business on Wednesday.
  • The bank chief also believes the Federal Reserve will start tapering will begin once unemployment reaches 4.5%.
  • Dimon’s comments put him at odds with the Fed, which reiterated its view on inflation last week.
  • Dimon also believes that tapering will begin once unemployment reaches 4.5%.
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JPMorgan CEO Jamie Dimon said that unlike the Federal Reserve, he doesn’t believe the current higher-than-usual US inflation rate is transitory, speaking in a Fox Business interview Wednesday.

He said the central bank will start tapering once it sees the “white of the eyes” – when the unemployment rate hits 4.5%, wages go up, and there are more than enough jobs.

The Wall Street bank chief sees rising inflation as almost inevitable, given the current fiscal environment in the US, he said on “Mornings with Maria”. Lawmakers passed a $US19 ($AU26) trillion COVID relief bill in March, covering direct payments to individuals among other stimulus measures.

“You still have a lot of stimulus that hasn’t been spent, and a lot more stimulus coming. You know, having fiscal deficit that big is unprecedented, and that by itself almost has to be inflationary,” Dimon said.

“I think there’s a portion that’s just temporary, and a portion that’s probably not.”

The comments set Dimon at odds with the Fed, which has pushed the narrative that inflation is only transitory and will stop rising sooner rather than later.

In recent months, the rate at which prices climb has been going up at a historically fast rate. Annual headline inflation stood at 5.4% for June, with consumer prices up 0.9% between May and June.

Inflation has been a concern for investors in assessing the strength of the US economy’s recovery from the COVID-linked slowdown. Fed policymakers may decide to raise interest rates if they believe inflation is too high.

The US central bank’s chairman, Jerome Powell, last week reiterated its stance on inflation and said the US economy still had a way to go before the Fed would hike rates or begin pulling back on its pandemic-era support.

Dimon said he believes the economy will need to make further progress, especially on employment and wages, before the Fed begins tapering. He argued the central bank will not base its decisions on forecasts as it usually does.

“They’re going to wait until they see the actual white of the eyes. I think they haven’t been this explicit. I think the white of the eyes is 4.5% unemployment, wages going up, jobs plentiful, and they are less concerned about inflation, they want to see growth,” Dimon said.

The US unemployment rate was 5.9% in June, according to the Bureau of Labor Statistics. compared with 3.5% in February 2020, before the COVID-19 outbreak.

In Dimon’s view, growth will continue, given that credit and debit card spending is topping pre-pandemic levels, there are enough jobs, and wages are rising. As schools reopen in the fall, unemployment levels will decline, he said.

At the same time, he expects interest rates to rise as central banks reduce their bond buying.

“One outcome is that rates go up. I think they belong much more at 3%, 3.5% and 2% on the short end, and then we still have healthy growth going for a couple of years,” he said, adding that the other, more negative, outcome is an uptick in inflation.

“But in the meantime, celebrate the growth, and you know, we’ll deal with the next problem when we get there,” he said.