Jamie Dimon Says It Would Be Best if the Fed 'Waited Now' for Rate Cuts

JPMorgan Chase chief executive Jamie Dimon has said it would be good if the Federal Reserve “waited now” before cutting interest rates. He is concerned that inflation could start rising again.

The advice clashes with where the Fed is likely headed, having set the stage to embrace an initial rate cut in September 2024.

Dimon had undergone an interview with the Swiss paper NZZ (short for Neue Zürcher Zeitung, or New Zurich Journal) last week. When asked whether interest rates were too high in the U.S., he noted a number of ways he saw the Fed making mistakes.

“The Fed had promised the world interest rates of 2% and they were wrong,” Dimon said. “The Fed then rapidly raised interest rates to 5%. It was a little late, but now inflation is moving in the right direction. But it would be good if the Fed waited now.”

His concern is that higher inflation could return, whether due to increased government spending, global re-militarization, large investments in the “green economy,” or restructuring of trade.

The Fed has focused on a soft landing — a gentle slowing of the economy with inflation falling but no large increase in unemployment — since last year. A Bloomberg report says that the Fed is ready to cut rates in September and that they’ve been laying the groundwork in speeches for the move over the last few weeks.

Over the last few weeks, more central bank officials, like Federal Reserve Governor Lisa Cook, believe a soft landing seemed possible, although still not guaranteed. Last week Fed Governor Christopher Waller said that “while I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.”

However, all this is complicated. The Fed is walking a tightrope over the economy. “The job is not done on inflation, we have more work to do there,” Powell told Congress earlier this month. “But at the same time, we need to be mindful of where the labor market is.”

Waller explicitly said that while a soft landing is possible, with signs of slowing economic activity and the labor market in a “sweet spot,” that might not continue. A “continued decline in the job vacancy rate and the vacancy-to-unemployment ratio” could lead to a larger increase in unemployment.

Should the Fed hold off on cuts with the economy possibly tipping into recession? Or hold with higher rates and watch growth collapse? The biggest challenge is no one knows for sure.