On December 6, 2023, on Capitol Hill in Washington, the United States, Jamie Dimon, CEO and Chairman of JPMorgan Chase, spoke at the U.S. Senate Committee on Banking, Housing and Urban Affairs’ oversight hearing on Wall Street companies. gesture.
Evelyn Hochstein | Reuters
JPMorgan Chase Chief Executive Jamie Dimon warned on Friday that multiple challenges, chiefly inflation and war, threatened an otherwise positive economic backdrop.
“Many economic indicators continue to improve,” the head of the nation’s largest bank by assets said in 2019. Announcement of first quarter financial results result. “However, looking ahead, we remain alert to a number of significant uncertainties.”
Dimon said a “disturbing” global landscape, including “horrible war and violence,” was one of the factors creating uncertainty for JPMorgan’s business and the broader economy.
In addition, he also noted that “ongoing inflationary pressures are likely to persist.”
Finally, on a somewhat related note, he noted that the Fed is working to reduce its holdings. $7.5 trillion balance sheet.
“We’ve never really experienced the full impact of quantitative tightening on this scale,” Dimon said.
The latter comment was a reference to the nickname for the process the Fed uses to reduce the level of its holdings of Treasuries and mortgage-backed securities.
The Fed is allowing up to $95 billion in proceeds from maturing bonds to be rolled over per month rather than reinvested, resulting in a $1.5 trillion reduction in holdings since June 2022. The plan is part of the Fed’s efforts to tighten financial conditions in hopes of easing inflationary pressures.
While the Fed is expected to slow the pace of QT in the coming months, balance sheets will continue to shrink.
Dimon said that, taken together, these three issues bring a lot of unknowns to the future.
“We don’t know how these factors will play out, but we have to prepare the company for a variety of potential circumstances to ensure we can consistently serve our customers,” he said.
Dimon’s comments come amid renewed concerns about inflation. Although the pace of price increases has been well below the peak in June 2022, data so far in 2024 show that inflation continues to be higher than expected and well above the Federal Reserve’s 2% annual target.
As a result, the market had to drastically change its expectations for rate cuts. At the beginning of this year, the market expected up to seven rate cuts, or 1.75 percentage points, but now expects only one or two, for a total of up to half a percentage point.
Higher interest rates are generally considered good for banks as long as they don’t lead to a recession. JPMorgan It reported on Friday that first-quarter revenue rose 8% on higher interest income and higher loan balances. However, the bank warned that net interest income this year may be slightly lower than Wall Street forecasts, sending shares down nearly 2% in premarket trading.
