JPMorgan warns inflation isn’t going away anytime soon

JPMorgan CEO Jamie Dimon is doubling down on his warning that inflation will last much longer than most expect.

In a statement during JPMorgan’s second-quarter earnings results, Dimon acknowledged that “some progress had been made” in bringing inflation down but warned it's not over yet.

“There are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade, and remilitarization of the world.”

“Therefore, inflation and interest rates may stay higher than the market expects,” Dimon predicted.

It’s not the first time JPMorgan’s CEO has warned about a prolonged inflation threat. In May, Dimon said, “The chances of something going wrong [with inflation] are higher than people think.”

At the time, Dimon highlighted the real threat posed by stagflation—an economic doomsday scenario of rising inflation and elevated unemployment.

Economists have been growing more optimistic about inflation over the past month after a series of better-than-expected reports.

The latest bout of good news came on July 11, when the Bureau of Labor Statistics reported that headline inflation had fallen to the lowest level in three years.

While many Fed officials believe inflation is almost over, America’s top central banker, Jerome Powell, agrees with Dimon on one crucial detail.

Budget deficits are unsustainable

Just like Dimon, Jerome Powell warns that U.S. government spending is on an “unsustainable” path.

Speaking at a European Central Bank panel, Powell said Washington’s massive fiscal deficits don’t make sense for a country with such low unemployment.

“The level of debt we have is not unsustainable, but the path that we’re on is unsustainable,” he said. “In the longer run, we’ll have to do something sooner or later, and sooner will be better than later.”

So far, Washington has spent $855 billion more than it has collected this fiscal year. Last year, the deficit amounted to a whopping $1.7 trillion.

According to the Peter G. Peterson Foundation, the total debt held by the federal government is currently at $34.8 trillion, which equals about $103,500 per individual.

The relationship between government deficits and inflation isn’t as clear-cut as many think.

As Nobel Prize-winning economist Milton Friedman noted back in 1981, “Government deficits can and sometimes do contribute to inflation.” But perhaps the biggest damage deficits do is they “foster irresponsible government spending.”

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