JPMorgan Chase (JPM) CEO Jamie Dimon fears the U.S. economy could face a repeat of the problems that hobbled the country in the 1970s.
“Yes, I think there’s a chance it could happen again,” he said Tuesday during an appearance at the Economic Club of New York.
The economy during that troubled decade was held back by stagflation, a combination of low growth and high inflation, and Dimon said such a risk exists again.
“I fear it will look more like the ’70s than before,” he added during a question-and-answer session with Marie-Josée Kravis, president of the Museum of Modern Art and wife of the KKR co-founder, Henry Kravis. .
“There are circumstances where it will be more like the ’70s than what we’ve experienced in the last 20 years.”
The CEO of the largest US bank has been warning for months of a number of risks to a resilient US economy, which could lead to “higher inflation and higher rates than markets expect”, as he expressed this in a letter to shareholders on April 8.
Federal Reserve officials backed that view last week as Fed Chairman Jerome Powell and several of his colleagues backed away from previous assurances about rate cuts and made clear that rates were likely to remain elevated longer than expected due to a higher than expected rise. inflation.
Dimon said in his April 8 letter that the bank was prepared for interest rates “from 2% to 8%, or even higher,” and he reiterated that prediction Tuesday.
“We would also manage stagflation,” he added.
Earlier this month, JPMorgan reported first-quarter results that showed rising interest rates posed an even bigger challenge, even for the nation’s largest bank.
Despite profits rising 6% from a year earlier, beating analysts’ expectations, the bank said a key revenue source, known as net interest income, was lower than expected by compared to the previous quarter.
This is the first sequential decline in this key revenue source for the bank in almost three years and it attributes the decline to “deposit margin compression and lower deposit balances.”
Dimon returned to other familiar topics in his Tuesday discussion, including his concerns about large government spending and the Fed’s efforts to shrink its balance sheet, as well as the ongoing wars in the Middle East and Ukraine and their potential for disruption of essential raw materials. markets, migrations and geopolitical relations.
At the same time, He Dimon described the US economy as “booming” and praised the resilience of the US consumer, US bank credit, real estate prices and stock prices.
Economic growth, he said, is essential to solving many problems.
“We have to do more and better and that is why we have to grow the economy,” he said.
Dimon also described the US economy as…
