Mark Lennihan/AP
- Be ready for energy prices to spike and interest rates to climb higher, Jamie Dimon said.
- The JPMorgan CEO warns geopolitical threats like Russia's invasion of Ukraine are critical concerns.
- Carefree government spending was a "sugar high" for the economy that looks set to fade, Dimon says.
Be prepared for higher energy prices, steeper interest rates, and a potential economic hangover from a reduction in government spending, Jamie Dimon says. But Russia's invasion of Ukraine – and how it's reshaping global relations – is the number one threat to the world, according to the JPMorgan CEO.
"I think people should be prepared for higher oil and gas prices, higher rates," Dimon told CNBC-TV18 on Tuesday.
He raised the possibility in another recent interview that the Federal Reserve could raise its benchmark rate as high as 7%, compared to about 5.5% now, to squash inflation.
The billionaire banker warned it's unclear what the fallout will be from governments spending huge amounts of money and running up their debts in recent years, especially as borrowing costs have surged over the past 18 months.
"Unbelievable debt financing and high levels of debt around the world – we don't know the effect of that," he said.
"That's a little bit of a sugar high, and that's a little bit going to go away," Dimon said about the deficit-spending spree.
"We're hoping we have a soft landing, but all these other things are there," he continued, pointing to quantitative tightening, the Ukraine conflict, the prospect of painfully high oil and gas prices this winter, and disruptions to international trade flows.
"I'm putting myself in the quite cautious category," he added, flagging the risk of "stagflation" – a painful combination of stagnant economic growth and stubborn inflation.
Dimon argued the Russia-Ukraine war has awoken countries to more threats to their national security. They now recognize the risks of relying on other countries for food, energy, microchips, rare-earth metals, and other important resources.
He questioned if other countries are taking the invasion of Ukraine — a democratic European nation — under threat of nuclear blackmail as seriously as the US.
"We may be at an inflection point for the free democratic world, that's how seriously I take it," he said.
Dimon also underscored that geopolitics, whether it's the Russia-Ukraine clash or mounting US-China tensions, pose severe danger to the global economy.
"We've dealt with inflation before, we've dealt with deficits before, we've dealt with recessions before," he said. "We haven't really seen something like this pretty much since World War II. There is no playbook."