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JPMorgan Chase Hoards Cash Indefinitely Forecasting Higher Inflation and Interest Rates

Long-term Inflation is here to stay if you agree with JPMorgan Chase CEO Jamie Dimon, who has revealed stockpiling cash to the tunes of $500 billion in order to take advantage of opportunities that will come with the rise in interest rates.

At a virtual conference organized by multinational investment bank JPMorgan Chase, Chief Executive Officer, Jamie Dimon expressed his confidence about the Federal Reserve increasing interest rates on account of the pressure of inflation. According to him, inflation is here to stay and is not transitory as opposed to the statement given by FED officials calling the growing inflation temporary and short-term. Dimon’s sentiments are also shared by other big players in the banking and finance domain like Morgan Stanley, hedge fund billionaires and Deutsche Bank. 

The Federal Reserve’s 2% inflation target has already been outstripped in April mainly due to the effects of economy reopening, contained demand and supply restrictions. With the relaxation of rules post-COVID decline and increase in vaccinations across the world, consumer prices have risen at 5% YoY in May 2021, signaling the nature of inflation this year. With the FED ignoring these escalations, it can soon find itself in a trap. The Federal Reserve is expected to make a statement on Wednesday that will indicate the tools the Central Bank of the US will be using, to control the inflationary surge in the economy. 

JPMorgan’s net assets are worth a whopping $3.7 trillion with its net interest income coming to $55 billion in the last year. This year’s projected net interest income goes down to $52.5 billion. The major reasons for the decline, as per Dimon, are the decision to hold back cash and the fall in credit card balances. Income from trading in the 2nd quarter is estimated to be around $6 billion which is lower than the ‘abnormal’ revenue of 2020 in the same period. But on a happy note, the company’s automated investing service You Invest has successfully generated $500 billion in assets, despite the low confidence of the CEO in the product’s worth. Also, the CEO declared the income from Investment Banking to be the bank’s best quarter at about a 20% increase compared to last year. It displays the company’s strength in M&A Advisory and stock and bond issuance.

In addition to the bank’s current strategy of holding cash to later invest in high-yielding assets, the CEO also discussed the causes and consequences of current market conditions as well as the threat and competition it is facing due to financial-technology companies like Paypal. The latter’s market capitalization stands higher than all of the banks in the country. 

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JPMorgan Chase Hoards Cash Indefinitely Forecasting Higher Inflation and Interest Rates