JP Morgan CEO "Inflation Will Persist for a Considerable Time"…Contradicts Financial Authorities' Optimistic Outlook

Consumer Price Outlook Hits Highest in 8 Years
Wall Street Issues Warning Voices

▲Jamie Dimon, CEO of JP Morgan [Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Jamie Dimon, CEO of JP Morgan and a Wall Street titan, has forecast that the inflation trend in the United States will continue for a considerable period. This reverses the authorities' previously optimistic outlook that inflation would be temporary, signaling growing market concerns about inflation.

According to CNBC on the 14th (local time), CEO Dimon stated at a remote conference hosted by Morgan Stanley, "It is highly likely that U.S. inflation is more than just temporary," adding, "Because of this, we are focusing on hoarding cash rather than immediately investing."

Dimon further assessed that due to the high inflation rate, the U.S. Federal Reserve (Fed) may need to raise the benchmark interest rate.

He said, "Looking at our balance sheet, we have $50 billion (approximately 559.5 trillion KRW) in cash," adding, "We are concentrating all efforts on securing cash while waiting for investment opportunities at higher interest rates."

As the head of the largest bank in the U.S., Dimon has been leading JP Morgan for 15 years since 2006 and is regarded as a Wall Street heavyweight. His remarks have attracted more attention amid divided expert opinions on whether inflation is a temporary issue triggered by raw material shortages or supply chain problems caused by COVID-19 during the normalization process from the pandemic, or if it will be a sustained trend.

Earlier, the Fed stated that current inflation is short-term and temporary, but Wall Street figures such as Deutsche Bank and hedge fund billionaires have warned that the Fed is overly optimistic about inflation risks.

Paul Tudor Jones, a Wall Street hedge fund titan, also said in an interview with CNBC on the same day, "If the Fed ignores the risk of high inflation again at this Federal Open Market Committee (FOMC) meeting, it is a signal to strongly bet on inflation-related trades," and announced plans to invest in commodities, cryptocurrencies, and gold.

Following Jones's remarks, the price of Bitcoin surpassed $40,000 per coin again.

U.S. consumers' future inflation expectations also support CEO Dimon's outlook. According to a May survey by the New York Federal Reserve Bank, U.S. consumers expect prices to rise by 3.6% over the next three years, the highest figure since August 2013. The one-year short-term inflation expectation was 4.0%, the highest since the New York Fed began related surveys in 2013.

Following the Labor Department's announcement that the U.S. Consumer Price Index (CPI) rose sharply by 5.0% year-on-year in May, and with market forecasts predicting continued price increases, the Fed's concerns ahead of the FOMC meeting on June 15-16 are expected to deepen.

However, Bloomberg News reported that, contrary to the New York Fed survey results, there are many indicators suggesting that inflation concerns have somewhat eased.

The University of Michigan's June consumer sentiment survey showed that the expected inflation over the next 5 to 10 years slightly dropped from 3.0% in the previous month to 2.8%.

The 10-year expected inflation rate (BEI), measured by the difference between yields on 10-year U.S. Treasury bonds and inflation-protected securities, rose to 2.56% in mid-May but has since fallen to 2.35% as of this date.