Jamie Dimon: Prices will be higher for longer

Year-over-year inflation is at its lowest rate in years, but Jamie Dimon still thinks high prices could last longer than anticipated.

The longtime JPMorgan Chase CEO said in a note accompanying the bank’s second-quarter results Friday that despite a strong consumer price index report for June, other elements could play a role in lingering inflation.

“There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade, and remilitarization of the world,” Dimon said in the statement. “Therefore, inflation and interest rates may stay higher than the market expects.”

Dimon’s comments come after Thursday’s Consumer Price Index report—a crucial economic indicator of average expenses for Americans—revealed a third consecutive month of cooling inflation and year-over-year inflation that was around its lowest rate in more than three years. Prices were up 3% in June compared to a year ago, an improvement from the 3.3% year-over-year inflation recorded in May.

The positive inflation report has some market participants predicting that the Fed will lower rates in the near future. San Francisco Fed president Mary Daly said Thursday’s CPI report could be a sign that the Fed should cut rates. Federal Reserve Chairman Jerome Powell’s comments on the growing unemployment rate before Congress this week also gave some investors hope that rate cuts could be on the horizon.

However, Dimon joins other notable economists in warning about the ballooning U.S. deficit, which the Congressional Budget Office predicts could reach as high as $1.9 trillion, or 7% of the country’s GDP, up from its forecast of $1.5 trillion in February.

Powell last week warned that the U.S. deficit was too high given how well the economy is faring and that lawmakers should address the country’s financial situation “sooner rather than later,” the Financial Times reported.

“The level of debt we have is completely sustainable but the path we are on is unsustainable,” Powell said at the European Central Bank’s conference in Portugal.

JPMorgan on Friday reported higher-than-expected profit and revenue numbers but Dimon still cautioned about potential future risks from geopolitical instability.

“The geopolitical situation remains complex and potentially the most dangerous since World War II—though its outcome and effect on the global economy remain unknown,” Dimon added Friday.

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