Investing.com - Risks that the U.S. economy could slide into stagflation due to geopolitical tensions, price pressures and deficits cannot be ruled out, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon said on Thursday, according to Bloomberg News.
Speaking to Bloomberg Television at an event held by JPMorgan in Shanghai, Dimon noted that he believed the Federal Reserve was approaching the current economic climate correctly.
The central bank left interest rates unchanged earlier this month, adopting a wait-and-see stance to monetary policy as officials seek more clarity around the impact of sweeping U.S. tariffs.
Recent data has suggested some resilience in the U.S. economy, although the Fed has flagged risks from rising inflation and unemployment. Separate surveys have shown a deterioration in consumer sentiment and increased inflation expectations because of the tariffs.
"I don’t agree we’re in a sweet spot," Dimon said, adding that indications of broader economic strength do not "tell you what the future is going to be".
He argued that there is a "chance of inflation going up and stagflation is a little bit higher than other people think". Stagflation refers to a period of tepid economic activity combined with stubbornly elevated price growth.
U.S. President Donald Trump rolled out punishing "reciprocal" tariffs on both friends and foes alike in early April, but later partially delayed the levies in a bid to give White House officials more time to negotiate dozens of individual trade agreements. Duties on China have also been temporarily paused and lowered, bolstering hopes for a cooling in global trade tensions.
Still, baseline 10% tariffs and levies on items like steel, aluminum and autos remain in effect. By some estimates the U.S. effective tariff rate is also above where it was at the start of Trump’s second term in power and at the highest level since the 1930s.
Separately, Dimon said he would like to see more "certainty" around a massive tax and spending package currently being debated in Congress.
"I’d rather get that done," Dimon said. However, he flagged that U.S. lawmakers will need to address the country’s "deficit problem".
The U.S. House of Representatives is tipped to hold a pre-dawn vote on Trump’s "big, beautiful" budget bill, with Republicans in power in the chamber hoping to overcome days of internal disagreements over the measure.
Along with the extension of 2017 tax cuts, the legislation would slash taxes charged on tips and car loans, while boosting spending on defense and border security. Reductions to key food and health programs for low-income Americans are also included in the bill.
Nonpartisan analysts have said the changes would add between $3 trillion to $5 trillion to the U.S.’s $36.2 trillion debt load.