As "rate-cutting frenzy" sweeps the globe, the leader of Morgan Stanley calls on the Federal Reserve to remain patient
JPMorgan Chase CEO Jamie Dimon called on the Federal Reserve to remain patient in response to potential inflationary pressures. Despite Dimon's view, expectations of a Fed rate cut are still rising in the interest rate futures market, leading to a surge in global "rate cut trades." Assets such as gold and US Treasuries have benefited from the easing cycle, with prices soaring. Dimon pointed out that there are many reasons why future inflation rates may rise again, including increased government spending. Recently, US Treasury prices have continued to rise on expectations of rate cuts. There is a discrepancy between the views of JPMorgan Chase's CEO and market expectations
According to the financial news app Zhitong Finance, Jamie Dimon, the CEO of JPMorgan Chase (JPM.US), a giant on Wall Street, stated in an interview with European media on Wednesday that the Federal Reserve needs to remain patient with the next monetary policy adjustment to address the possibility of rising inflation in a turbulent world. "It cannot be denied that inflation is moving in the right direction. But it would be even better if the Federal Reserve can firmly maintain patience now," Dimon said.
It is worth noting that while the CEO of JPMorgan Chase is calling for caution from the Federal Reserve, expectations of a rate cut by the Fed in the interest rate futures market continue to rise. The "rate cut trade" is becoming increasingly popular globally, with assets such as gold and US Treasury bonds benefiting from the rate cut cycle experiencing significant price increases.
In the recent US interest rate futures market, bets on when the Fed will cut rates have finally reached a significant moment. Traders have priced in a 100% chance of a rate cut in September by the Fed for the first time, and the probability of a rate cut in December has quickly risen to nearly 60%, indicating that the vast majority of traders are betting on the Fed cutting rates twice, rather than just once as implied by the Fed's dot plot. Some traders are even betting on three rate cuts this year, with the probability of a rate cut in November quickly surpassing the important threshold of 50% in recent days.
As a result, the "rate cut trade" has swept the globe in recent days, with the price of spot gold hitting a new historical high on Wednesday after two months, and US stocks and Treasury prices rising across the board. Benefiting from the escalating rate cut cycle, the Bloomberg US Treasury Index, which measures the overall trend of US Treasury prices across all maturities, erased all of its price declines from 2024 last Friday, pushing the index's return to 0.3%. It even completely wiped out the price decline that reached as high as 3.4% in April this year, with US Treasury prices continuing to rise this week driven by rate cut expectations.
In the interview, JPMorgan Chase CEO Dimon mentioned: "I believe there are many reasons why the future inflation rate may rise again: continuously increasing government spending, world remilitarization, significant investments in green economy, and trade structure adjustments, among other factors."
At the Federal Reserve meeting on July 30-31, the interest rate futures market bet that Fed policymakers would keep the highest policy rate unchanged at 5.25-5.5% for over twenty years. However, given the positive progress in easing price pressures, including the unexpected drop in the CPI price index in June, they may set a timetable for rate cuts, and most Fed officials may even revise the dot plot.
Dimon has been the CEO of JPMorgan Chase since 2006. In the interview, he stated that he does have a plan for his eventual successor, but any decision will be made by the JPMorgan Chase board. He said: "The board is very familiar with these candidates, and they are all very capable. We are also considering external candidates, but the most likely scenario is an internal candidate from JPMorgan Chase."