Jamie Dimon, CEO of JPMorgan Chase, issued a warning on Tuesday regarding attempts by central banks such as the Federal Reserve to lock in the economic outlook, especially considering the Federal Reserve's recent extremely poor performance in predicting data. Damon warned not to rely on economic forecasts from central banks such as the Federal Reserve, as in the near past, the Federal Reserve's data forecasts were "vastly wrong". He also stated that investors need to prepare for various economic possibilities.
As the head of the largest commercial bank in the United States with assets, he has issued multiple warnings about the future economic prospects, which is his latest warning. His latest warning states that various factors are currently at play, making it very difficult to predict economic data.
At the Future Investment Initiative Summit held in Riyadh, Saudi Arabia, Damon said, "Investors must be prepared for various possibilities and probabilities, rather than just proposing an action plan." He added, "I want to point out that 18 months ago, the Federal Reserve was completely wrong. Therefore, I will be quite cautious about what may happen next year
These comments once again lead us back to the Federal Reserve's inflation outlook for early 2022 and most of 2021, when Fed officials insisted that the surge in inflation would be "temporary". But it turned out that this was not the case. The Federal Reserve did not start raising interest rates until March 2022 to curb the already explosive inflation, and many economists angrily criticized the Fed for acting too late.
According to the forecast data released in March 2022, in addition to misjudging prices, Federal Reserve officials also expect their key interest rate to rise to only 2.8% (much higher than the current 5.25%) by the end of 2023, and the core PCE inflation rate to be 2.8%, 1.1 percentage points lower than the current level of the Federal Reserve's favorite inflation indicator.
According to the latest forecast data released by Federal Reserve officials after the September interest rate resolution, the Federal Reserve significantly revised up the US GDP growth rate to 2.1% (+1.1%) and 1.5% (+0.4%) in Q4 2023 and Q4 2024, and correspondingly revised down the unemployment rate forecast to 3.8% (-0.3%) and 4.1% (-0.4%) in Q4 2023, which appears slightly optimistic compared to the consensus expectations of economists. The latest dot matrix chart shows a strong hawkish vibe: this time, the expected interest rate is as high as 5.1%, 50 basis points higher than the June forecast. The Federal Reserve's forecast for the federal funds rate in 2025 has also increased, with a median expectation of 3.9%, compared to the previous 3.4%.
Damon: The discussion about whether to continue raising interest rates by 25 basis points is meaningless
Some analysts are currently focusing on whether the Federal Reserve will raise interest rates by another 25 percentage points before the end of 2023. But Damon said, "I don't think a 25 basis point or more increase in interest rates would make any difference. In my opinion, it may not have much impact." "Whether the entire interest rate curve rises by 100 basis points or not, we will be prepared
The CME "Federal Reserve Observation Tool" shows that the probability of the interest rate futures market not adjusting the benchmark interest rate during the November interest rate meeting is 97%, and this probability number has risen to 99% at one point; The probability of a 25 basis point interest rate hike in December is only 29%.
In the eyes of some Federal Reserve officials, the recent surge in 10-year Treasury yields means an interest rate hike equivalent to approximately 25 basis points. The 10-year US Treasury bond yield briefly broke the important threshold of 5% this week, setting a new high since 2007. Therefore, several Federal Reserve officials, including some 2024 voting officials, have recently expressed a similar view that the tightening financial environment caused by soaring yields may reduce the need for further interest rate hikes.
Among other recent warnings, Dimon has warned that the federal funds rate may exceed 7%. When JPMorgan Chase released its performance report earlier this month, Dimon warned, "This may be the most dangerous moment in the world in decades
Fiscal spending is higher than at any time in peacetime, and people have a feeling that central banks and governments can handle all these things well. But I am cautious about what will happen next year, "Damon said at the Riyadh summit.
Last month, Damon issued similar warnings about the resilience of the US economy, particularly regarding rampant government spending and the possibility of a sudden slowdown in the US economy.