JPMorgan Chase CEO Jamie Dimon isn’t ruling out stagflation in the United States, citing risks posed by large government budget deficits, including in America, and the disruption to global trade induced by US tariffs.
The term refers to a nightmare combination of economic stagnation or even a recession and rising inflation. It’s a very tricky scenario for central banks to navigate: raising interest rates to rein in inflation risks stifling growth and pushing up unemployment, but cutting interest rates to juice the economy could stoke inflation.
“There’s a chance that (we’ll) have stagflation (in the US),” Dimon told Bloomberg Television in Shanghai, China, Thursday. The billionaire stressed that he was not making a prediction but that “we have to be prepared for something like that.”
“Global fiscal deficits are inflationary. I think the remilitarization of the world is inflationary. The restructuring of trade is inflationary. And this is not all an American thing,” he added.
Dimon’s comments come as President Donald Trump is trying to pass a “big, beautiful bill” through Congress that would slash taxes for Americans — a move the nonpartisan Congressional Budget Office estimates would add trillions of dollars to the federal deficit over the coming years.
On Monday, Dimon told investors he believes that the odds of stagflation are likely twice that of what others have projected.
He also said that the full effects of Trump’s tariffs have yet to be felt and that markets are exhibiting an “extraordinary amount of complacency” in the face of those and other risks.
The US Federal Reserve has kept its benchmark interest rate steady since January as Trump’s erratic trade policy has injected a huge amount of uncertainty into the world’s largest economy — in turn provoking robust criticism from Trump who would like to see rates fall.
In his Thursday interview at JPMorgan’s China Summit, Dimon disagreed with the idea that the Fed was operating in a “sweet spot.”
“The (US) economy has been doing well… we’ve effectively been in a soft landing,” he said, referring to the central bank’s success in bringing inflation down without tipping the economy into recession. But he added: “That does not tell you what the future’s going to be.”
Dimon said the Fed is “doing the right thing” by waiting to see how the various inflationary factors, including America’s fiscal hole, affect the US economy before deciding whether to cut or raise rates.
“They also have to follow the facts,” he said.
Last week, credit rating agency Moody’s downgraded America’s perfect credit score, citing its ballooning government debt burden.
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