JPMorgan CEO Jamie Dimon said on Wednesday that markets should be prepared for the war between Russia and Ukraine to last for years to come, suggesting that the conflict posed a greater risk to the American economy than the prospect of hikes on the key interest rate from the Federal Reserve.
In an interview with Bloomberg, Dimon compared the tensions arising from Russia’s invasion of neighboring Ukraine to the decades-long struggle for power between the United States and the Soviet Union, saying “the Cold War is back,” and saying that policymakers should maintain a plan for the possibility that the war in Ukraine continues for years to come.
“When you look at Ukraine ... there’s a chance that this goes on for years, and you completely rattle our global energy markets, wheat markets, commodity markets, and the Western world needs to be prepared for that,” said Dimon.
When asked if sanctions were effective in deterring Russia from continuing the war, Dimon described the sanctions as “a pretty powerful tool,” but expressed ambivalence about the sufficiency of these measures to resolve the conflict.
“Sanctions [are] not the same as having tanks or airplanes, but they are working to the extent that the Russian GDP is going to drop by ten or fifteen percent with the current sanctions. And remember there are sanctions that are also on the export controls and stuff like that, and the next round, if Europe really stops oil ... Russia could get another ten percent down. So it’s a tool in the toolkit; it’s not definitive. What’s definitive is tanks.”
Dimon was also outspoken on Federal Reserve policy, suggesting that the Fed should have been more proactive to raise interest rates in order to curtail inflation.
“We’re a little late but remember two years ago we had 15% unemployment and no vaccine. People should take a deep breath and give them a chance,” said the influential banker. “The sooner they move the better.”
The JPMorgan CEO suggested there was a one-in-three chance that the Fed could manage a “soft landing,” delicately hiking interest rates while avoiding a recession altogether. He assigned the same odds for the chance of a “mild recession,” while noting that there is “a chance it’s going to be much harder than that.”
