Jamie Dimon says central banks got forecasts ‘100% dead wrong’ — and it doesn’t matter if Fed hikes rates again
Jamie Dimon said central banks 18 months ago got their economic forecasts “100% dead wrong” — and said it doesn’t matter whether the Fed hikes rates again this year.
The outspoken JPMorgan Chase CEO blasted the Federal Reserve — which has hiked the benchmark federal funds rate to between 5.25% and 5.5%, a 22-year high — and downplayed the importance of the central bank’s next move.
“I don’t think it makes a piece of difference whether rates go up 25 basis points or more,” Dimon said during a panel at the Future investment Initiative summit in Riyadh, Saudi Arabia, per Bloomberg.
“Whether the whole curve goes up 100 basis points, be prepared for it. I don’t know if it’s going to happen,” he added, according to Bloomberg.
Dimon noted that in April 2022, inflation was 8.3% and nearing its June 2022 peak of 9.1%, though the US Federal Reserve had predicted in 2021 that 2022’s Consumer Price Index — a key inflation gauge that tracks what consumers pay for goods and services — would sit between 2.5% and 3%.
“Fiscal spending is more than it’s ever been in peacetime, and there’s this omnipotent feeling that central banks and governments can manage through all this stuff,” Dimon said in the discussion moderated by Carlyle Group co-founder David Rubenstein.
“I am cautious about what will happen next year,” he added, noting the need for “real leadership” to navigate geopolitical concerns.
September’s policy meeting was the second time in six policy meetings that the Fed decided to hold the rate steady under the guise that doing so would tamp inflation back down to 2%, which the US economy hasn’t seen since 2012.
The Fed’s next meeting will be held from Oct. 31 to Nov. 1.
Dimon likened the current situation — characterized by high inflation and slowing economic growth — to the 1970s, when there was also high spending and lots of waste, Bloomberg reported.
The JPMorgan boss also expressed distaste for policymakers’ approach to climate change, likening current efforts to a game of “whack-a-mole” that boasts no clear strategy, according to the outlet.
“We will make the breakthroughs we need, but it’s going to be later and longer than we think due to our own basic incompetence,” Dimon said.
Representatives for Dimon at JPMorgan did not immediately respond to The Post’s request for comment.
Should interest rates remain higher for longer, US economic growth could shrink by 0.5%, strategists at Goldman Sachs wrote in a note earlier this month.
The resilience of the labor market and consumer spending in the face of the Federal Reserve’s aggressive rate hiking cycle likely means that the neutral rate — the level at which interest rates begin to weigh on the economy — is higher than it was during the last cycle, the firm noted.
As a result, the Fed’s current benchmark rate is not high enough currently to cause a recession, making the central bank less likely to feel the need to cut rates, Goldman Sachs analysts wrote.
However, consumers are still feeling squeezed by the economy.
Just this week Fitch Ratings data showed that Americans are defaulting on their auto loans at levels not seen in nearly three decades.
The percentage of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September — up from a previous high of 5.93% in January.
For those with the best credit scores of at least 750, average interest rates are about 5.07% for a new car and 7.09% for a used one, according to Bankrate.
Buyers with credit scores of less than 640, meanwhile, are looking at distressing interest rates of about 14.18% and 21.38% for new and used cars, respectively.
