Jamie Dimon, the chief executive of JP
Morgan Chase, said he was preparing
for “drastically higher” interest rates in
the US and suggested that the Federal
Reserve and the American government
had stimulated the econony too much.
Some asset prices were now “in bub-
ble territory”, he warned, adding that
US interest rates would have to go up
significantly further than markets
expected to damp down inflation,
which is now 7 per cent.
In a wide-ranging letter to share-
holders, America’s best known banker
said the huge stimulus policies of the
Fed and Washington had been success-
ful in addressing the pandemic, but had
probably been too much and gone on
too long.
“The Federal Reserve and the gov-
ernment did the right thing by taking
bold dramatic actions following the
misfortune unleashed by the pandemic.
In hindsight, it worked. But also in
hindsight, the medicine (fiscal spend-
ing and quantitative easing) was prob-
ably too much and lasted too long.”
He added, “I do not envy the Fed for
what it must do next: The stronger the
recovery, the higher the rates that
follow (I believe that this could be
significantly higher than the markets
expect) and the stronger the quantita-
tive tightening.”
Dimon, who has run what is Amer-
ica’s biggest bank by assets for 17 years,
warned that it could lose about $1 bil-
lion on its Russia exposure, although
this was modest beside the $48.3 billion
headline profits it chalked up last year.
Dimon did not provide details on
JP Morgan’s potential loss or a time
frame but said the bank was concerned
about the secondary impact of Russia’s
invasion of Ukraine on companies and
countries.
America needed to be ready for the
possibility of an extended war in
Ukraine with unpredictable outcomes,
he said. “We should prepare for the
worst and hope for the best.” While the
More than half a million people are
working at small companies which are
at heightened risk of insolvency as
employers struggle to cope with a
cocktail of challenges.
About 6,500 small and medium-
sized businesses are at higher than
average risk of going bust, according to
research, as they battle rising prices,
higher taxes, the fallout from Brexit
and Covid-related staff shortages.
Start-ups that are up to three years
old are at particular risk, Quantuma
found. The advisory firm predicted that
by 2024, corporate insolvencies will
reach the highest in a decade, with
19,000 businesses a year likely to fail.
It said that this year corporate insol-
vencies will return to 2019 levels after
pandemic-related support and protec-
tion was unwound.
“The twin forces of Brexit and Covid-
19 exacerbated by the cost-of-living
Half a million jobs at risk
in struggling small firms
crisis are conspiring to create challeng-
ing trading conditions for most, but not
all, SMEs,” the firm said.
It predicted there would be a “sharp
acceleration” in insolvencies in the
second half of this year as “inflationary
pressures, the cost-of-living crisis, and
fallout from the invasion of] Ukraine
weigh heavily on the micro-end of
the market and particularly owner-
managed businesses”.
Recent official figures show that
close to one in seven businesses are not
fully trading because of staff shortages
linked to Covid, hitting their revenues
as energy and other costs rise.
Research by the Office for National
Statistics has indicated that 5 per cent
of businesses, or more than 250,000
companies, fear imminent failure.
The Institute of Directors said last
week that more than half of business
leaders say the cost of energy was exert-
ing a negative impact on their organisa-
tion, three times as many as a year ago.James Hurley
44 Tuesday April 5 2022 | the times
Dimon warns
of ‘drastically
higher’ US rates
US economy was strong, he added: “We
are facing challenges at every turn: a
pandemic, unprecedented government
actions, a strong recovery after a sharp
and deep global recession, a highly po-
larised US election, mounting inflation,
a war in Ukraine and dramatic eco-
nomic sanctions against Russia.
“Our bank is prepared for drastically
higher rates and more volatile
markets.” The war could affect geopoli-
tics for decades, he added.
JP Morgan Chase serves 66 million
households and five million small busi-
ness customers in the US via 4,790
branches, and employs 270,000 people.
It has big investment banking and com-
mercial banking divisions and a wealth
management business that manages
$4.3 trillion of client assets. It recently
launched a digital bank called Chase inthe UK as well as buying Nutmeg, the
digital wealth manager.
Dimon, 66, was appointed chief
executive in 2005 and given the chair-
manship in 2006. A billionaire thanks
to his stock arrangements, he is credit-
ed with pushing JP Morgan into strong-
er market positions in retail and invest-
ment banking.
He was paid $34.5 million last year,
an increase of 10 per cent. He could
continue as chairman when he event-
ually relinquishes his role as chief exec-
utive, the bank announced in a filing
yesterday.
Like central banks around the world,
the Fed embarked on a money creation
spree when the pandemic hit. In 2020
and 2021, QE amounted to $4.4 trillion,
or 18 per cent of US GDP. The govern-
ment added to that boost with a further
fiscal stimulus of about $5 trillion, or
21 per cent of GDP.Patrick Hosking Financial Editor
Jamie Dimon said
that stimulus had
gone on too longBusiness