The Fed may claim it’s not Jay Powell’s job to please the markets, but backing from JPMorgan CEO Jamie Dimon doesn’t hurt.
In September, Powell and the Federal Open Market Committee (FOMC) cut the U.S. base rate by 50 basis points—twice the 25 bps most analysts had expected.
The move was met with a market rally, boosting stocks. While some analysts now wonder if the Fed acted too aggressively, Dimon has expressed strong support for the decision.
In a Bloomberg TV interview published yesterday, the Wall Street veteran was asked if he thought Powell’s cut was a mistake: “No, actually,” he responded.
“You gotta separate the here and now,” Dimon said. “Inflation has definitely been coming down, they don’t want to go into a recession. Unemployment has been going up.”
While Dimon is openly skeptical about whether Powell and his peers will pull off their task—namely whether they can bring inflation back to the 2% target—he did continue to back the group’s strategy more widely.
“They were late raising rates but they raised very high, rapidly, to 5%, which I think is the right thing,” Dimon added. “And they’re right to take the foot off the gas on that one.”
Focusing on the long term
The billionaire banker, who took on the top job at JPMorgan nearly two decades ago, has also distanced himself from speculators who hung on Powell’s every word for a hint of what cut would be to come.
Indeed, the 68-year-old has questioned whether the public really cares about the details around interest rates, telling CNBC in August: “Every day 325 million Americans go to work, go to their jobs, take care of their families, take care of their kids, build out their house, change a job. And it could be affected by the Fed changing rates by 50 base points? I don’t think so.”
In the interview released this week, Dimon again advocated for stepping away from the detail and focusing on the bigger picture.
“I don’t think it matters that much—50, 25—honestly, but I think it was okay,” he added. “If inflation comes back, I’m looking at future things—the remilitarization of the world’s inflationary; the fiscal deficits of the world—particularly the United States—are inflationary; the green economy’s inflationary; demographics are inflationary. It’s very possible energy prices down the road—I’m talking two or three years—will be inflationary.
“Those will hit later. They [the Fed] should react at that time to those things, but I don’t think we can anticipate that. We don’t know that that’s going to happen.”
Pricing in debt
Like many of his contemporaries, Dimon has warned about Uncle Sam’s national debt, now at $35.7 trillion.
Previously, the Harvard Business School alumnus warned that national debt is the most “predictable crisis” in history—an issue that experts warn could get worse under either a Harris or a Trump presidency.
“People are making charts about what everyone’s said and what it might mean for the deficit,” Dimon said. “What they said, what they actually do and what actually happens are completely different things. I’m not gonna worry about that.
“I think what you should worry about is the deficit today is 7% of GDP… The debt-to-GDP is 100% today. Deficits by their nature are inflationary, and at one point, we’re going to have to deal with this.”
Dimon said he would “beg” Congress to create a powerful committee tasked with reducing the deficit, adding: “The other way to do it is to wait until there’s some kind of disaster in the market, then you’re kind of forced to do it at the wrong time. I don’t know when that might be.”
