Dimon, the longtime chairman and CEO of the bank, said that the cash is on hand in case too-high inflation drives the Fed to increase interest rates. He said on Monday during Morgan Stanley’s U.S. Financials Conference that JPMorgan is angling to profit from the soaring interest rates.
“We have a lot of cash and capability, and we’re going to be very patient because I think you have a very good chance inflation will be more than transitory,” Dimon said, according to CNBC.
“If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates,” the CEO maintained. “I do expect to see higher rates and more inflation, and we’re prepared for that.”
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Later Monday, Morgan Stanley CEO James Gorman told CNBC’s Wilfred Frost on Closing Bell that he, too thinks that higher inflation may be lasting and the Fed may be forced to hike rates earlier than expected.
“The question is when does the Fed move?” Gorman said. “It has to move at some point, and I think the bias is more likely earlier than what the current dots suggest, rather than later.″
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Some experts think that the economy is in danger of overheating given the central bank’s easy monetary policies linked with the federal spending that has been introduced into the economy, which is additionally undergoing rising demand as the pandemic declines.
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Consumer prices increased 5% for the year ending May, according to a report released last week by the Department of Labor. The higher-than-expected numbers from the consumer price index mark the largest 12-month increase since August 2008.
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The Fed has said it wants to keep its monetary policies in place until there is 2% conveyed growth and maximum employment. Central bank leaders think that inflation will breach that 2% target but also that the increase would be temporary and the level will settle back down next year.
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Bill Dudley, the former president of the Federal Reserve Bank of New York, recently suggested that if overheating increases too much, the Fed might have to raise interest rates suddenly, which could cause increased volatility in short-term rates and an increased likelihood of an “economic hard landing.”
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The Fed’s Federal Open Market Committee is holding a two-day meeting starting on Tuesday that will be closely watched, although it is not expected that the central bank will deviate from its current policy trajectory.
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