Rising Inflationary Pressure
Possibility of US Rate Hikes Remains
Critical Remarks on Europe: "Structural Reforms Needed"
Jamie Dimon, Chairman and Chief Executive Officer (CEO) of JP Morgan Chase, pointed out that the market is underestimating President Donald Trump's repeated tariff threats. Contrary to President Trump's calls for a rate cut, Dimon also suggested that the US Federal Reserve (Fed) could actually raise interest rates.
According to Bloomberg News and the Financial Times (FT), on July 10 (local time) in Dublin at an event hosted by Ireland's Ministry of Foreign Affairs, CEO Dimon commented on President Trump's repeated tariff threats, stating, "Unfortunately, I think there is complacency in the financial markets."
CEO Dimon said, "I don't like to use the term 'taco trade' (the expectation that Trump always backs down out of fear) because I think it was the right thing for him to back down." However, he added, "If the US economy weakens even slightly, he (Trump) will face a tough time."
He also said that, contrary to market expectations, there is a possibility that the US could raise interest rates. Due to strong inflation outlooks, the Fed is holding off on rate cuts and is taking a wait-and-see approach. The current US benchmark interest rate is 4.25 to 4.50 percent. Since the start of Trump's second administration in January this year, the rate has remained unchanged.
CEO Dimon stated, "I think the probability of rates going higher is greater than what others believe. If the market is pricing in a 20 percent chance, I see it as a 40 to 50 percent probability."
Regarding Europe, he offered a critical view, saying that industrial structural reform is necessary. He pointed out, "Over the past 10 to 15 years, Europe has fallen from 90 percent of US GDP to 65 percent. This is not good." He continued, "We have a huge and powerful market, and our companies are large, successful, and global in scale. Europe has those things as well, but they are gradually diminishing."
This criticism is in line with former European Central Bank (ECB) President Mario Draghi's call for an annual 800 billion euro industrial strategy. In a report last year, President Draghi highlighted similar issues and urged sweeping reforms within the European Union (EU).
Meanwhile, CEO Dimon said that concerns about President Trump seeking a third term are "premature," suggesting that Trump might ultimately prefer his son Eric as a candidate. Eric Trump is the second son of President Trump and his first wife, Ivana Trump.
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