Jamie Dimon warns it’s possible the Fed could be forced into a sharp move next year

JP Morgan CEO Jamie Dimon looks on during the inauguration of the new French headquarters of US’ JP Morgan bank on June 29, 2021 in Paris.
Michel Euler | AFP | Getty Images

JPMorgan Chase CEO Jamie Dimon has warned investors that the Federal Reserve could still be forced into a sharp policy move next year — despite its best efforts to soothe concerns over inflation and interest rates.

Fed Chairman Jerome Powell has already suggested that the central bank could start to dial back on its pandemic-era monetary stimulus before the end of this year. At the Fed’s policy meeting on Wednesday, he will provide more information. Also, the U.S. central banks will publish their highly anticipated inflation and interest rate forecasts.

CNBC-TV18 spoke with Dimon, who said that if there is continued high inflation in America over the next few month then the central banks could have to move quickly.

You will see an immediate reaction if the inflation rate is too high for the central bank’s to pull liquidity out and “jam on brakes”, Dimon said. In an interview that Dimon gave on Tuesday, Dimon stated that while I am not going to predict it, they may have to act sometime next year.

“The Fed can’t always be proactive — I mean, sometimes they’re going to have to be reactive.”

The top uncertainty for the Fed has been the path of inflation. According to the latest data, U.S. consumer price inflation was slightly lower than the 13.-year peak of 5.4% recorded in July.

Powell has said that prices are temporary. Dimon stated that the U.S. may need to acknowledge that some of these price rises are permanent if they continue to see high inflation numbers into December.

“I doubt [come] December, people will say it’s all transitory when it’s now been going on for quite a while,” he told CNBC-TV18, but added that concerns would be curbed if global growth remains healthy while inflation is high.

“Inflation to me, it looks like there’s a part that’s transitory and there’s part that’s not — that’s not a disaster,” he added.

Correction: This story has been updated to remove an incorrect word in a quote by Jamie Dimon.

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