In a recent warning for risky asset bulls, JPMorgan’s CEO Jamie Dimon has proposed a halt to the Federal Reserve‘s interest rate increases.
In a recent interview with Bloomberg, Dimon, a critic of cryptocurrencies, stated that pausing rate increases might be the right decision at this point. Nevertheless, the CEO implied that the Fed may need to continue raising interest rates after a pause to curb inflation. Dimon suggests this could be more stubborn than initially expected:
I think they were right to pause at this point. There was a big hike, up to 500 basis points. Take a break, but I think they’ll have to raise it a bit more, this inflation could last a bit longer. I think people are coming to this, which means rates may need to rise a bit more. Investors should be a bit prepared for this, just like managing your own business, be a bit prepared for it, whether you’re a finance company or a real estate company.
One other thing I’ll be prepared for is the volatility that quantitative tightening could very well create. We’ve never experienced quantitative tightening. We’ve had quantitative easing for a large part of the last 15 years. But now you’re going to see quantitative tightening, and I think the effects could be a bit harsher than people expect, but hopefully we’ll all get through it.
In his latest annual letter to JPMorgan shareholders, Dimon stated that America’s largest bank is ready for higher interest rates and more prolonged inflation. He mentioned that assets across the board, including crypto and “meme stocks,” are about to face the consequences of quantitative expansion (QE) and rapid money supply expansion ongoing for over a decade. The expert noted:
This QE period also led to extraordinary liquidity and increased money supply, which undoubtedly led to price increases in various investment classes, from stocks and bonds to crypto, meme stocks, real estate, and others. Even more importantly, this also increased bank deposits from 13 trillion dollars to 18 trillion dollars. As the Fed grapples with inflation, QE is now being reversed into quantitative tightening (QT).