‘Stagflation’ Risk Remains, JPMorgan CEO Jamie Dimon Warns

Topline

JPMorgan Chase CEO Jamie Dimon warned stagflation in the U.S. economy remained a risk due to factors including the restructuring of global trade and remilitarization of the world, adding that the Federal Reserve was doing the right thing by taking a “wait-and-see” approach and holding interest rates in place.

JPMorgan Chase CEO Jamie Dimon warned that the risk of stagflation still remained.

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Key Facts

Speaking to Bloomberg on the sidelines of his company’s Global China Summit in Shanghai, Dimon said, “I think there’s a chance you’ll have stagflation,” while noting that he was not making a prediction or saying it’s “going to happen.”

The JPMorgan CEO then noted that things like the “global fiscal deficit,” the “remilitarization of the world,” and the restructuring of global trade were all “inflationary.”

Dimon said, “I don’t agree that we (the U.S.) are in a sweet spot,” adding that while the economy “has been doing well…that does not tell you what the future is going to be.”

But he said he believed the Federal Reserve was “doing the right thing, to kind of wait and see before they decide,” on further interest rate changes.

When asked about how the new GOP and Trump-backed tax bill will likely raise deficits further, Dimon said the legislation will likely “add a little bit” to the already high deficit, but he thinks “it’s still better we get certainty around the tax bill.”

On the recent slide in the dollar’s valuation, Dimon said he wasn’t too worried about “short-term fluctuations” but understood why “people might be reducing dollar assets.”

What Is Stagflation?

Stagflation is a term used to describe a combination of economic stagnation amid rising inflation, something that is seen as the “worst of both worlds.” Stagflation is a rare phenomenon that usually runs counter to traditional economic models, where inflation usually coincides with economic growth while dropping during recessions. What makes stagflation worse, is that it cannot be countered with conventional economic measures, as acting against inflation can worsen an economic slowdown, while attempting to revitalize growth can boost inflation. Last month, Federal Reserve Chair Jerome Powell warned that President Donald Trump’s bid to impose sweeping tariffs on nearly all imports could lead to stagflation in the U.S. Speaking at the Economic Club of Chicago, Powell said the tariffs could put the Fed in a “challenging scenario in which our dual-mandate goals are in tension,” pointing to the regulator’s attempt to balance its inflation control efforts while trying to maintain a strong job market.

What Did Dimon Say About China?

Dimon was asked about his company’s continued investments in China, even as rivals are pulling back and “derisking” amid the ongoing trade war between Beijing and Washington. The JPMorgan CEO said his company is a “long-term investor” in the country. He said the “consensus is that companies are going to be doing business” in China, even though there could be some adjustments because of the trade negotiations. “I don’t think the American government wants to leave China,” echoing Treasury Secretary Scott Bessent’s comments that Washington was not seeking decoupling of trade with Beijing. Pointing to the recent talks between Chinese and U.S. officials in Geneva, Dimon said: “I hope they have a second round, third round or fourth round and hopefully it will end up in a good place.”

Crucial Quote

“Look at China…They’ve done an enormous job over the last 20 years lifting up their people. That doesn’t mean I personally agree with everything they did. I’m a full-throated, red-blooded American patriot and capitalist. But I understand that they’re doing what they can to lift up their country,” Dimon said.

Tangent

Earlier this month, JPMorgan Chase lowered its recession forecast after the U.S. and China agreed to slash reciprocal tariffs against each other. The bank’s chief U.S. economist, Michael Feroli, said recession risks are “still elevated, but now below 50%.” Goldman Sachs economists also lowered their probability of a U.S. recession over the next 12 months from 45% to 35% after the deal.