🎲 Interest Rates. To Cut, or not to Cut. That is the question

19 พ.ค.

Jamie Dimon Sees ‘Lot of Inflationary Forces in Front of Us’, as in recent interview to Bloomberg JPMorgan CEO has warned for months that rates could stay high.

Jamie Dimon said he’s still more worried about inflation than markets appear to be.

The JPMorgan Chase & Co. chief executive officer said significant price pressures continue to influence the US economy and may mean interest rates will be higher for longer than many investors are expecting. He cited costs linked to the green economy, re-militarization, infrastructure spending, trade disputes and large fiscal deficits.

“There are a lot of inflationary forces in front of us,” Dimon said in an interview on Bloomberg Television Thursday. “The underlying inflation may not go away the way people expect it to.”

The S&P 500 and Nasdaq 100 closed at record highs Wednesday amid optimism over monetary policy easing after a measure of underlying US inflation cooled in April for the first time in six months. Dimon said that markets have been healthy for a while, but that doesn’t necessarily predict the future.

“If you have higher rates and — God forbid — stagflation, you will see stress in real estate and leveraged companies, and private credit,” Dimon said.

“Stocks are very high, and I think the chance of inflation staying high or rates going up are higher than people think,” the CEO said. “My view is whatever the world is pricing in for a soft landing, I think it’s probably half of that. I think the chances of something going wrong are higher than people think.”

The CEO has been warning for months that inflation could be stickier than many investors are predicting, and wrote in his annual letter to shareholders that his bank is prepared for interest rates ranging from 2% to 8% “or even more.”

Dimon said that “a lot of happy talk” is why markets aren’t pricing these elements in.

Even though a bigger surprise would be higher rates, Dimon said that geopolitics could create the “main stress that we’re worried about” amid the impact those dynamics have on oil and gas prices, trade and alliances. With war in Ukraine, the situation in the Middle East, tensions in North Korea and the use of nuclear blackmail, the geopolitical situation is “very tense,” he said.

When it comes to China, the right thing for America is to “fully and deeply” engage, he said. Still, the fragile relationship between the two countries makes banking in the country — where Dimon said JPMorgan has roughly 1,500 multinational clients — a riskier prospect.

“They’re not leaving China, so we’re going to serve our clients there, we’re just much more cognizant the risk is higher,” he said. “You look at China from a risk-reward basis, it used to be very good, it’s not so great any more.”

Basel III
The financial world has been in a heated debate over US proposals tied to what’s called the Basel III Endgame — an international regulatory overhaul initiated more than a decade ago in response to the financial crisis of 2008. US regulators have decided to adjust the original proposals following substantial backlash. Dimon reiterated his comments that the proposals are excessive.

“I would love to know what the end game is,” Dimon said. “Regulators should answer the question: What do you want — How do you want the system to work?”

Uncertainty pushes Gold prices (XAUUSD) more higher, later than The US Bureau of Labor Statistics on Wednesday reported the April consumer-price index rose by 0.3% from March.
Shelter, gas prices remain sticky.
Notable call-outs from the inflation print include the shelter index, which rose 5.5% on an unadjusted, annual basis, a slowdown from March. The Shelter index (the largest US CPI component with near 32% weight) rose 0.4% month over month and was the largest factor in the monthly increase in core prices, according to the BLS.

Sticky shelter inflation that was one of the main reason of 2007-09 Financial crisis is largely to blame for higher core inflation readings, according to economists.

The main technical graph is an inverted (normalized) chart for expected Federal funds rate at mid-March 2025, based on respective Mar'25 FedFunds Futures Contract (ZQH2025).

Following the upside trend, as well as forming reversed Head-and-shoulders structure, the nearest target can be around 8 1/4 - 8 1/2 over the next 12 months.

Historical backtest analyses says, this scenario is not a nonsense, as in early 1980s the difference between US 10-Year T-Bond rates and US Interest rate has been already hugely negative at similar market conditions (fighting against non-stop inflation).



Let's see what is next in nowadays..