"100% Wrong" Wall Street Emperor Dimon’s Stern Criticism of the Fed

"The economic forecast released by the Federal Reserve (Fed) 18 months ago was 100% dead wrong."

Jamie Dimon, chairman of JP Morgan Chase, known as the 'Emperor of Wall Street,' sharply criticized the central bank, the Fed. Concerns were raised that massive debt, reckless fiscal spending, and high inflation amid growing economic uncertainty evoke memories of the 1970s.

[Image source=Reuters Yonhap News]

According to MarketWatch and others, on the 24th (local time), Dimon said at the 'Future Investment Initiative Summit' held in Riyadh, Saudi Arabia, "There is doubt whether the central bank and government can adequately handle the negative economic consequences brought by rising inflation and slowing growth."

This was a public criticism of the Fed’s earlier underestimation of inflation as 'transitory' and its delayed tightening response. In its March 2022 forecast, the Fed expected the year-end benchmark interest rate (upper bound) to be 2.8% and the core inflation rate to be 2.8%, but as the year-end approaches, the upper bound of the interest rate is 5.5%, and the core inflation rate as of October is 4.1%, far exceeding those estimates. Dimon has been pointing out since 2021 that the Fed has underestimated inflation risks. Earlier this year, he also said, "We must prepare for the possibility that interest rates will rise further and remain elevated for a longer period." Recently, he even warned of a 7% interest rate era.

On the day, Dimon expressed concern, saying, "Fiscal spending is much higher than usual. There is a sentiment that the central bank and government have omnipotent power to manage everything," and added, "I am quite cautious about what will happen next year." He also emphasized the need for flexible responses considering multiple variables rather than fixing economic forecasts. He said, "I don’t see a big difference whether interest rates rise by 0.25 percentage points or not," but added, "Even if the yield curve rises by 1 percentage point, I will prepare for it."

There were also remarks that the current situation is similar to the 1970s, summarized by high inflation and low growth. Dimon said, "What we are seeing today is more similar to the 1970s." He also warned that the rapidly increasing fiscal debt, along with geopolitical risks from Ukraine and the Middle East, are impacting global oil and food prices and potentially causing a hunger crisis. Additionally, he mentioned nuclear proliferation as the greatest threat to humanity.

On the same day, Larry Fink, CEO of BlackRock, also said, "It reminds me of the 1970s," adding, "The 1970s were all about bad policies. Today is about bad policies and major macro changes." Fink cited the politicization of supply chains, populism, and legitimate immigration restrictions as inflation factors. He also pointed out the soaring fiscal deficit, saying, "Like the Fed’s balance sheet expansion, it causes inflation." He emphasized, "As a result, interest rates will remain higher."

At the same forum, Ray Dalio, CEO of Bridgewater Associates, described the global economic outlook for next year as "pessimistic." He said, "The monetary policies we will see will have a greater impact on the world," and diagnosed, "It is difficult to be optimistic."

This content was produced with the assistance of AI translation services.