JPMorgan CEO Dimon Optimistic About Inflation!

  JPMorgan CEO Dimon Optimistic About Inflation! Jamie Dimon, CEO of JPMorgan Chase, said: "Inflation is not temporary, but with rates low over the long term, an ideal economic situation can be created." Although inflation has frightened some investors in recent months, it has been the subject of debate among stockbrokers. Many analysts argue that inflation is the result of the pandemic and is temporary. In a statement made on Wednesday, the Federal Open Market Committee suggested that inflation will not be temporary as in some thoughts, as it pulled the benchmark funds rate to 2023 instead of 2024. Jamie Dimon, CEO of America's largest bank JPMorgan, believes inflation may be permanent. But if the scenario Dimon envisioned does come true, things may not be as bad as some think. It is worthwhile to take a closer look!

Prepare for Rising Rates!

As the head of JPMorgan JPM (NYSE) $150,43 +2,51 (+%1,70), one of America's largest banks, CEO Dimon has proven to be a great manager during the great recession and the pandemic. "Inflation is very likely to be more than temporary," he made clear at a conference he attended recently. Dimon said the net interest income revision was due to the bank's decision not to reinvest the proceeds in securities with their current returns.

Jamie Dimon, CEO of JPMorgan Chase, said: "Inflation is not temporary, but with rates low over the long term, an ideal economic situation can be created."

Generally speaking, since most Analysts do not look to downside revisions, Dimon said it is necessary to believe that the long-term outlook outweighs the short-term results. It's better than no return at all, even if it doesn't pay as high an interest rate on the types of securities that banks invest in. He is patiently waiting for opportunities to reinvest with $500 billion in cash at better rates. JPMorgan estimates that if the Fed increases its benchmark federal funds rate by 1 percentage point, it will generate an additional $6 billion in net interest income for next year.

What Does Dimon Mean?

Dimon, CEO of JP Morgan, likely thinks that either rate increases could come sooner than expected, or that long-term rates of inflation will be pushed higher by the end of the year. Should this point happen, it would make more sense to reinvest the money. This may support a comment Dimon made about his earlier definition of the ideal economy. In this ideal scenario, inflation and rates rise enough to realize low unemployment or even full employment while the economy continues to grow strongly. This would also be the most ideal situation for banks. As Dimon said, "We will one day learn where we made the right decision."  

Source: The Motley Fool

 

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