Jamie Dimon is pushing back on the Federal Reserve’s prediction that high inflation will only be “transitory” and said that JPMorgan Chase is “effectively stockpiling” cash.
Dimon, the longtime chairman and CEO of the bank, said that the cash is on hand in case too-high inflation causes the Fed to raise interest rates. He said on Monday during Morgan Stanley’s U.S. Financials Conference that JPMorgan is angling to benefit from the rising interest rates.
“We have a lot of cash and capability, and we’re going to be very patient because I think you have a very good chance inflation will be more than transitory,” Dimon said, according to CNBC.
“If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates,” the CEO continued. “I do expect to see higher rates and more inflation, and we’re prepared for that.”
FED OFFICIAL HINTS AT TAPERING BOND PURCHASES AS ECONOMY HEATS UP
Some experts think that the economy is at risk of overheating given the central bank’s easy monetary policies coupled with the federal spending that has been infused into the economy, which is additionally experiencing surging demand as the pandemic wanes.
Consumer prices increased 5% for the year ending May, according to a report released last week by the Department of Labor. The higher-than-expected numbers from the consumer price index mark the largest 12-month increase since August 2008.
The Fed has said it wants to keep its monetary policies in place until there is 2% sustained growth and maximum employment. Central bank leaders think that inflation will breach that 2% target but also that the increase would be temporary and the level will settle back down next year.
Bill Dudley, the former president of the Federal Reserve Bank of New York, recently warned that if overheating increases too much, the Fed might have to raise interest rates suddenly, which could cause increased volatility in short-term rates and an increased likelihood of an “economic hard landing.”
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The Fed’s Federal Open Market Committee is holding a two-day meeting starting on Tuesday that will be closely watched, although it is not anticipated that the central bank will veer from its current policy trajectory.
