JPMorgan CEO Jamie Dimon has warned investors that the Federal Reserve may need to take a sharp political step next year, despite its utmost efforts to calm fears about inflation and interest rates. This comes as Federal Reserve Chair Jerome Powell has already suggested that the central bank could start tapering pandemic-era monetary stimulus before the end of this year. Further details are set to be outlined later on Wednesday at the conclusion of the two-day Fed policy meeting. The U.S. central bank is also expected to release its forecasts on inflation and anticipated interest rates.
Speaking to CNBC, Dimon stated that if inflation rates in the United States continue to rise over the coming months, the central bank may need to act swiftly. Dimon added that if inflation is high enough to cause the central bank to "hit the brakes" and withdraw liquidity, "you will see a huge reaction." He expressed, "I don't expect that, but it's possible they could do that at some point next year."
He predicted that the Fed would react rather than take preemptive measures. The largest uncertainty for the Federal Reserve remains the path of inflation. The latest data showed that U.S. consumer prices rose by 5.3% year-on-year through August, slightly down from a 13-year high of 5.4% in July. Powell has argued that this price spike is temporary. However, Dimon mentioned that if these hot inflation figures persist into December, U.S. policymakers may have to acknowledge that at least part of the price increases is here to stay.
He noted, "Concerns will be tempered if global growth remains solid, even as inflation rises." He added, "Current inflation has two facets: one is temporary, and the other will last a long time – this is not a disaster."
