JPMorgan's Dimon warns: Attacks on the Federal Reserve by the Trump administration will trigger inflation

JPMorgan Chase CEO Jamie Dimon issued a warning during the earnings call on Tuesday, stating that the Trump administration’s attacks on the Federal Reserve could backfire, leading to higher borrowing costs and inflation.

Dimon made it clear that he fully supports central bank independence and has “great respect” for Fed Chair Jerome Powell personally. He pointed out: “Any action that undermines (the Fed’s independence) may not be a good idea. In my view, it will have the opposite effect. It will raise inflation expectations and could push up interest rates over time.”

These remarks came at a time when the market is closely watching the increasingly tense relationship between the Federal Reserve and the White House. Earlier in the week, Powell revealed that he was under criminal investigation by the Justice Department of the Trump administration. In response, Trump on Tuesday said he didn’t see any problem with his actions and countered: “We should lower interest rates. Jamie Dimon may want higher rates. That way maybe he can make more money.”

Defending Central Bank Independence

Dimon’s views have received broad support from top figures in global finance. Eleven top central bank governors, including ECB President Christine Lagarde and Bank of England Governor Andrew Bailey, released a statement emphasizing that central bank independence is the cornerstone of price, financial, and economic stability.

Other Wall Street executives have also voiced concerns. Robin Vince, CEO of Bank of New York Mellon, pointed out that undermining the Fed’s independence runs counter to the White House’s desire to ease consumer burdens. Vince stated: “Questioning one of the basic principles of the bond market actually runs the risk of backfiring, which could push rates higher, because the market will have to worry about things that, frankly, it shouldn’t have to worry about.”

JPMorgan CFO Jeremy Barnum echoed Dimon’s warning, saying the bigger issue is “damage to the outlook of the U.S. economy and the stability of the global economy.”

Performance Pressure and Stock Price Drop

Aside from macro policy concerns, JPMorgan’s fourth quarter results showed that while the U.S. economy remained resilient, banking operations still faced challenges. Q4 net profit fell 7% year-on-year to $13 billion, slightly above analysts’ estimates of $12.8 billion, but below $14 billion a year ago. As a result, JPMorgan’s stock price closed down about 4.2% on the New York market.

Weak performance in the investment banking business was a key drag. Investment banking fee income for the quarter fell 5% to $2.3 billion, missing analysts’ growth forecasts. In particular, debt underwriting revenue dropped 2.5%, far below market expectations of nearly 20% growth. Barnum admitted: “Our performance was not what we wanted.” However, trading departments performed strongly, with equity trading revenue surging 39% to $2.9 billion, and fixed income trading revenue up 7.5%.

Additionally, regarding Trump’s proposal last Friday to set a 10% cap on credit card interest rates, Barnum warned that this would reduce the supply of consumer credit, rather than lower borrowing costs. He said that if faced with aggressive business change directives lacking legitimate reasons, banks do not rule out the possibility of initiating legal challenges.

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