JPMorgan Chase CEO Jamie Dimon on Wednesday explained how tremendous capital spending could keep inflation high, which would make interest rates higher for longer.
“Inflation is both what people expect, but it’s also capital demand, and it seems to me there’s a lot of demand for capital,” he said in a CNBC interview.
Dimon claimed “huge infrastructure requirements,” global deficits, wars, and remilitarization could add pressure to the economy and push up longer-term bond yields.
“I don’t know if these things will push the rate up, but if they do, that could be the skunk at the party, that people want to be paid more money for long-term bonds, and so you just got to keep your eye on it,” he said.
The Federal Reserve held interest rates steady last week, holding it in the range of 3.5% – 3.75%. Three members of the board dissented the decision, wanting a hike instead. Dimon’s sentiments is similar to one of the dissenters, Beth Hammack, the Cleveland Fed president.
Hammack made a statement last Friday that she sees higher energy prices and inflationary pressures stemming from the demand side.
Massice data centers across the country are major capital demand sources, as we recently see Google looking to raise $25 billion on Thursday. Hyperscaler capital spending is expected to continue to rise by 3.1%.
“It’s a big build,” Dimon said, adding that companies are making real calculations about the growing demand for AI models.
“Hopefully there’ll be more productivity after they’re built,” he said. “It takes a while to get them up and running.”
Dimon also flagged elevated leverage across financial markets, saying borrowing levels remain high in areas such as prime brokerage, hedge funds, exchange-traded products, and Treasury market arbitrage.
