The boss of JP Morgan, the largest US bank, has said Donald Trump’s attacks on the Federal Reserve chair, Jerome Powell, are putting central bank independence at risk and could backfire and ultimately push up interest rates and inflation.
Jamie Dimon told reporters on Tuesday he had “enormous respect” for the Fed chair, who on Friday became the target of a controversial criminal investigation by the US Department of Justice (DoJ) over alleged “abuse of taxpayer dollars”.
Powell has denounced the investigation, linked to a $2.5bn (£1.9bn) renovation of the Fed’s headquarters in Washington DC, claiming it is punishment for not setting interest rates in line with the US president’s wishes.
“Everyone we know believes in Fed independence,” Dimon said during an earnings call. “And anything [that] chips away at that is probably not a great idea, and in my view, will have the reverse consequences. It’ll raise inflation expectations and probably increase [interest] rates over time.”
Central banks around the world have also rallied to defend the Fed and its chair.
Ten central bank governors including the Bank of England governor, Andrew Bailey, and European Central Bank chair, Christine Lagarde, issued an extraordinary joint statement offering “full solidarity” for Powell, who Trump has repeatedly criticised for failing to cut interest rates fast enough.
Trump, who appointed Powell in 2018, has claimed he is unaware of the DoJ investigation.
Speaking about broader geopolitical risks – with Trump issuing fresh threats against Iran less than two weeks after seizing Venezuela’s president Nicolás Maduro – Dimon said JP Morgan would focus on serving clients. “We’ll deal and navigate with the politics and the issues that we have to deal with around the world … and we’re comfortable we can build our business,” he said.
He made the comments as JP Morgan released fourth-quarter earnings results showing a 7% drop in profits to $13bn. That fall was linked to a one-off cost associated with its takeover of a credit card partnership with Apple, previously held by rival US bank Goldman Sachs.
The deal was announced days before Trump called for a 10% cap on credit card interest rates, which has caused shares in major credit card providers to tumble.
“We’ll be doing all the relevant contingency planning,” JP Morgan’s chief financial officer, Jeremy Barnum, told analysts on Tuesday.
He said the credit card market was among the most competitive sectors that JP Morgan was involved in. Barnum warned the potential cap would not simply weigh on company profits, but “people will lose access to credit, like on a very, very extensive and broad basis, especially the people who need it the most”.
Barnum added: “And so that’s a pretty severely negative consequence for consumers, and frankly, probably also a negative consequence for the economy as a whole.”
He said the lack of details, particularly on how the cap would be imposed and enforced, made it hard to assess how it would ultimately affect JP Morgan’s own earnings.
Later on Tuesday en route back to Washington from making a speech in Detroit, Trump further defended his opposition to Powell and also lashed out at Dimon.
“Yeah, I think it’s fine what I’m doing,” he said in response to a reporter’s question. He called Powell “a bad Fed person” who has “done a bad job”. He called again for lower interest rates.
“Jamie Dimon probably wants higher rates. Maybe he makes more money that way,” Trump said.
