What Risk Is JPMorgan Chase Taking To Follow As We Enter 2022?

    What Risk Is JPMorgan Chase Taking To Follow As We Enter 2022? CEO Jamie Dimon has prepared JPMorgan Chase JPM (NYSE) $162,57 +2,41 (+%1,50) for higher-than-expected inflation. Investors had long since removed the grappling with inflation pressure in the market. The consumer price index (CPI) came in October with 6,2%, the biggest annual change since November 1990. Federal Reserve Chairman Jerome Powell said it's time to remove the word "temporary" when describing inflation. He also acknowledged that "the risk of high inflation increases". The first to say that inflationary pressures could continue was JPMorgan Chase's chairman, Jamie Dimon (JPM 1.18%). Moreover, he said that inflation could rise faster than expected and this could pose a risk. He added that despite all these developments thanks to the preparations taken, he did not worry much about this issue.

Dimon: "There may be a voluminous inflation tail"

In 20121, US consumers saw the first inflationary pressures in energy prices (30% year-on-year increase). In addition, production interruptions occurred due to supply chain interruptions and thus semiconductor shortages. Significant increases in new and used car prices, real estate prices and rents also saw a jump. Dimon said he was following these inflationary pressures and decided that "inflation may have a thick tail" He added that inflation is "more likely to go higher than people think."

What Risk Is JPMorgan Chase Taking To Follow As We Enter 2022?

As a result, the bank has positioned itself to deal with this risk, he said.

How much can high inflation hurt banks?

As inflationary pressures persist, central banks will like it when they raise the federal funds rate, which raises interest rates, as it will result in higher net interest income. As a result, if short-term interest rates rise, funding costs will rise faster than interest earnings on assets, putting pressure on the bank's profit margins. JPMorgan Chase bu enflasyonist baskılara hazırlanmak için ne yapıyor?

JPMorgan Chase is "saving up cash"

Dimon noted that being liquid can help the bank protect itself from high inflation and the high interest rates that can come with it. JPMorgan Chase is sacrificing potential profits in 2021 by accumulating cash. It also has approximately $600 billion in cash and cash equivalents that it can use against inflation in the unexpected increase.

Investor package

Jamie Dimon has done a great job leading JPMorgan Chase. His long-term forecast positions the bank well if inflation remains stable.  

Source: The Motley Fool

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