JPMorgan Chase & Co’s chief executive officer Jamie Dimon on Thursday warned that markets have underestimated the chance the US Federal Reserve will need to accelerate interest rate hikes.
The Fed and other central banks “may have to take more drastic action than they currently anticipate — reacting to the markets, not guiding the markets,” Dimon said in an annual letter to shareholders.
“I believe that many people underestimate the possibility of higher inflation and wages, which means they might be underestimating the chance that the Federal Reserve may have to raise rates faster than we all think,” Dimon said in the annual epistle that also tackled trade policy, Brexit and firm succession, among other issues.
Worries about faster Fed tightening have hung over US markets this year, along with rising tensions between US President Donald Trump’s administration and its counterparts in China and Europe over trade policy.
Dimon, who praised Trump’s moves to cut taxes and curtail regulation, said there were many “legitimate complaints” on trade but cautioned against “miscalculations” by officials, adding that “this obviously creates higher risk and more uncertainty until resolved.”
In its dealings with China, Dimon urged the US to “define, very clearly” what it wants, lay out a clear time line with consequences for missed deadlines, “listen closely” to Chinese complaints and work with allies — especially in Japan and Europe.
Dimon, who also serves as chairman of the Business Roundtable, appeared to criticize the Trump administration’s unilateral approach on trade during a conference call with the lobby group last month.
The right way to address trade was to “really think it through strategically with the allies and make sure we’re doing the right thing and not doing these one-off things which tend to backfire,” he said.
The bank’s ultimate plan on Brexit would depend on the final deal between Britain and the EU, but it expects to move 300 to 400 jobs around Europe in the short-term, Dimon said.
Dimon, who warned of an EU breakup in last year’s shareholder letter, this time expressed greater optimism .
“Last year, we spoke about whether Brexit would cause the European Union to unravel or pull together — and it appears, particularly with the new leadership in France and the steady hand in Germany, that the countries might pull together,” he said.
In the letter, Dimon touted the firm’s fleet of 31,000 people focusing on development and engineering, and expounded on their work with artificial intelligence, big data and machine learning.
He specifically singled out systems they have helped to unfurl for clients, predicting they would “solidify and grow our position.”
“We expect these products to drive lots of customer interactions, even as some very smart fintech competitors emerge,” he said.
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