In an interview with El Financiero Bloomberg TV on 14 November 2023, Jamie Dimon, Chairman and CEO of JPMorgan Chase, provided an in-depth analysis of several critical aspects of the U.S. economy, including inflation, the Federal Reserve’s interest rate policies, and the country’s credit rating.
Dimon discussed the recent data indicating a slowdown in U.S. inflation in October. He expressed a view that people might be overemphasizing short-term figures, suggesting that these numbers, due to various adjustments, might not fully represent the actual situation. He believes that inflation could be more persistent than the latest data suggests.
Regarding the Federal Reserve’s response to these inflation figures, Dimon believes that their decision to pause rate hikes is appropriate for the moment. He pointed out that the Federal Reserve has already significantly increased rates and it would be prudent to observe the impact of these hikes on the U.S. economy. This observation is particularly relevant as the U.S. is experiencing a reduction in excess fiscal spending and the onset of quantitative tightening.
However, Dimon cautioned that further rate hikes might still be necessary. He emphasized the importance of being prepared for this possibility, viewing it as a crucial aspect of risk management. Dimon expressed concern that inflation might not subside as quickly as some might hope, indicating a potentially prolonged period of economic adjustment.
Dimon also reflected on the recent actions by credit rating agencies regarding the United States’ credit rating. He acknowledged the downgrade of the U.S. credit rating by Fitch Ratings three months ago and Moody’s recent decision to change its outlook on the U.S. credit rating to negative. These actions were attributed to concerns over increasing debt servicing costs and political polarization. While Dimon recognized the validity of these concerns, he expressed a degree of skepticism about the timing and rationale behind these rating changes.
He pointed out the irony in the rating agencies’ decisions, noting that despite the increased debt and financing issues, the market still prices the U.S. as AAA-rated, which he believes is a more accurate reflection of the situation. Dimon argued that the market’s assessment is likely more accurate than that of the rating agencies.
Furthermore, Dimon highlighted an interesting perspective on the global context of these ratings. He noted that many countries rated AAA by these agencies rely on the protection of the American military, questioning the logic behind rating these countries higher than the U.S.
Despite his criticisms, Dimon agreed that the U.S. needs to address its fiscal challenges. He expressed concern over the growing deficit, which is larger than anticipated this year, and the potential consequences that might arise from it. He emphasized the importance of managing these issues effectively, as they could worsen over time if not addressed.