The Federal Reserve announced on Wednesday (September 18) a 50 basis point rate cut. While the rate cut action was in line with market expectations, the extent of the cut still surprised some individuals. Jamie Dimon, the CEO of JPMorgan Chase & Co., expressed skepticism about the outlook for the U.S. economy following the rate cut.
According to reports from Bloomberg and Quartz, Dimon stated at an event in Washington on Friday that, “I’m more skeptical than others. I think the odds are low.”
“I hope it’s true (referring to a soft landing for the economy), but I’m also more skeptical that inflation will disappear so easily, not because inflation hasn’t gone down—it has gone down—and can go down further,” said Dimon.
However, he also emphasized that while inflation in the United States has been on a downward trend, certain inflation risks could lead to price spikes in the coming years. Referring to the current national debt exceeding $35 trillion, he said, “Deficits are enormous—those are inflationary (drivers).”
Moreover, he mentioned that factors such as the green economy, demilitarization of the world, and global trade realignment are all drivers of inflation.
Dimon has repeatedly warned that the U.S. needs to address its debt issues to prevent further problems in the future, including inflation.
The Fed’s rate cut on Wednesday marked the first in four years. Lowering the benchmark interest rate by 50 basis points, this policy shift aims to achieve a soft landing for the economy.
Prior to the Fed’s announcement of the rate cut, there was a debate on Wall Street whether it would be a cut of 25 or 50 basis points. Dimon, however, remarked that what truly matters is the economic fundamentals, and the magnitude of the rate cut this time is not important.
In his annual shareholder letter in April, Dimon wrote that JPMorgan Chase was prepared for interest rates ranging from 2% to 8% or higher.
Regarding a soft landing for the economy, Dimon is not as optimistic as the Fed. He stated that he is unsure whether the U.S. economy will experience a soft landing and does not make predictions on this matter.
“We may have transitioned from lower interest rates and lower inflation rates to slightly higher interest rates and higher inflation rates. Whatever happens, we will deal with it. Economists are used to dealing with this kind of situation. This is not a disaster,” he said.
The CEO of the largest bank in the U.S. also emphasized that the Fed’s rate cut is unlikely to have a significant impact on the U.S. elections.