JPMorgan Chase (JPM) CEO Jamie Dimon warned on Wednesday that heavy demand for capital could keep inflation elevated, spurring higher-for-longer interest rates. “Inflation is both what people expect, but it’s also capital demand, and it seems to me there’s a lot of demand for…
pital,” he said in a Wednesday CNBC interview. Dimon said “huge infrastructure requirements,” global deficits, wars, and remilitarization could add inflationary pressure 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 noted
Last week, the Federal Reserve held interest rates at the current range of 3.5% to 3.75%. Three of its members dissented in favor of a quarter-point hike. Dimon’s warning echoes the argument made by one of those dissenters.
Cleveland Fed president Beth Hammack said in a statement last Friday that she sees higher energy prices and inflationary pressures coming from the demand side. A major source of capital demand is coming from the massive AI data center build-out, with Google parent company Alphabet (GOOG, GOOGL) looking to raise a fresh $25 billion on Thursday. Hyperscaler capital spending is expected to rise from 1.4% of US gross domestic product in 2025 to 3.1% in 2027, according to consensus data compiled by Apollo chief economist Torsten Sløk.